Live Trade: Scalping Flag Breakouts on the eMini 500
Hello traders, welcome to the scalping course and the fourth module, Live Examples. Today we are going to trade a flag in the ES, that’s the E-mini S&P 500 Futures Contract.
Hello traders, this is the ES nine range chart. As you can see we have moved from the lows at 20,66 and 20,64 up to this level 20,87. Now the first thing we need to notice is that we are at the daily resistance one, this is why we are trapped inside what seems to be a flag right now. We have made a lower low here and we are testing the flag. Now, you can see that the flag is being tested on the upside and on the downside. The targets to the upside should be around six, around seven ticks from the entry point which will be right here. Now seven ticks should go all the way up here. Now we don’t want to put our targets at exactly the designated or the calculated area because what we want to do is we want to get filled. So we are going to put our targets right here, a few ticks below our entry area.
Now let’s recalculate how many ticks we are from our entry point okay, from here to here. We are six points away, so our scalp is going to be a six point scalp, and our stop loss is about five and half points away so it’s an even one-to-one trade on this one. Now another thing we want to do is we want to spot the next area of support and resistance. You can see that price has been tested or has tested this area as support massively here, then we broke it and retested it as resistance before it broke to the downside. It’s very probable that price is going to test the same area as resistance right here. So what we want to do is we want to pay attention to this area. When price comes here, we are going to stops to break even and if we get stopped out at break even, well that’s too bad and on to the next trade. But we want to protect ourselves from sellers that are going to be at this point right here.
Now we also want to use a Fibonacci retracement level from this high to this low because we want to see if our targets or this area is around a strong Fibonacci level. So we are going to use the 61,8 and the 76,4 and as you can see—let me just run this and as you can see right here, these two levels are– well our first target is around the 76,4 and you can see the flag started to appear when the 61,8 was in fact rejected. We are also going to use–right now I think we are going to use stochastic oscillator because what we want to do is we want to know if we are actually–what price is doing right now. As you can see when price hit these lows right here and the 61,8 and the daily resistance one, we were actually in quite an [inaudilbe 00:05:10] territory, so it’s very normal that price is trying to correct to the downside before we move to the upside.
This is what we are doing right here. Again, we are going to use the stochastic oscillator and if you feel more comfortable using an RSI or a [inaudible 00:05:42] it is up to you but I think the stochastic oscillator works better when we are trying to scalp. This is actually what we are looking at right now and once we break to the upside, well I mean, the stochastic oscillator can do what it did right here. You can see that we correct it to the downside and then we head up to the upside. This is what we are expecting, okay. If we start to correct to the downside and we hit these lows, we are going to reassess our trading idea.
Okay, so what we have done here is we have changed the data from a nine-range to a five-range because a five-range works better. For scalping, it works better on the ES, and as you can see, we can have a very big visual of our flag to the upside. We have one high, two highs, and a third high right here. If we break with this high to the upside, we want to be on this straight, and of course if we don’t, we want to be out. Well, if we don’t break to the upside, we don’t want to trade this flag actually. So what we are going to do is we are going to stick with this idea and as you can see, we have hit some kind of a level to the downside but we are not oversold yet. I think we have to go down once more for us to get to truly oversold levels around the 603 level on the stochastic, such as in this case when we actually were at those oversold levels and then we rallied all the way up here. Now we are just going to wait to get filled and we will be back once we do.
Okay traders, we are back. As you can see, we broke with the flag to the upside and we are now filled on our five contracts, okay. Now you can see that we are experiencing some momentum to the upside as we had a bullish cross over right here on the stochastic oscillator and now the stochastic oscillator is pointing up. Now, we are just going to wait for price to hit these levels and when price hits these levels we are going to decide whether to take partial profit or not or if we are going to more stops to break even. It depends, actually, on if we are going to break with a 61,8 or not, the daily 61,8 or not. But for the time being we are on this trade and we are going to come back once this trade has developed. Our stops are below the previous low as always and our targets are calculated with the flag. Now we are going to wait and see how this trade develops and we will be back once it has.
Okay traders, now you can see that we hit this previous high, this previous area of resistance that we marked right here to the tick. Now, well we moved down a little bit which was expected. I wasn’t expecting a move up above this area without some kind of a selling pressure around this level but what we want to do is we want to shorten our risk. Right now we are testing these previous highs as support. If we break with these previous highs we want to get out of the trade as quickly as possible so we are going to shorten our risk. We could move our stop loss just below the area of resistance one, but that would be too tight in my opinion, and what we want to do is we want to let our trade break.
Right now we are seeing some selling pressure but as you can see these highs are being respected as we speak and we can come back and test the daily resistance one again. So we are going to put our stops just below this low right here because if we break down with the flag again, we want to get out of the trade again as quickly as possible. Sadly we couldn’t take profit right here because well, remember that we don’t take profits unless we have a one-to-one risk-to-reward ratio on the trade. I think right now we are finding some buyers and the expectation is that we are going to break with this area of resistance and we are going to take profit right here and the calculated target is on the flag. So we’ll be back once this trade develops even further and we’re going to see what happens.
Okay traders, as you can see now we have broken at this level of resistance and these highs. We are testing the exact high right now and we just broke to the upside. We are about to get filled on our target. We’re going to move our stops above to lock in, well these profits, as you can see, we are moving up, and we are about to hit our target around– well I think we can move our targets below to 20,94 level because well, it’s a round number and it’s a psychological area where we might find some sellers. I think that we can manually close our position right now. I think it’s safe to say that we have hit our targets and–well we our two ticks below our targets and I think we are going to manually close this position if we don’t start moving up quicker but I think that we are about to get filled on our targets on this flag so right now we just have to wait for price action or for price to get pushed up a little bit. If not, we are going to get out manually.
Yes, we got out manually there because I mean, you saw that we got to a tick from our entry point and I wasn’t going to risk this entire profit for our retest back to this area of resistance because price can’t actually come back to retest this almost at the 20,91 or even at the 20,90. By allowing price to do so, we were going to lose four points of profit, and that was a nice little flag scalp and that’s how you’re going to be doing it on your own.