Putting Everything Together
Hello traders. Welcome to the Scalping Course, and the second module, “Getting Started: The Backbone of a Scalper.” In this lesson, we are going to put everything together. This means that we are going to use the daily pivots, the daily Fibonacci levels and everything we have learned so far in order to look for scalping opportunities and historic price action.
We are going to use the one-meter and five-minute Euro US dollar charts and we are going to jump in on the empty form platform because I know that most of you traders out there use this platform as your scalping tool. So, without further ado, let’s go to the charts. Okay, guys, we are back and this is the Euro US dollar forward chart, one hour chart and we are in the one hour chart because I want to show what the daily pivots look like. And, of course, the daily pivots are only calculated for the actual trading session, but because we are going to go through historic price action, we need historic pivot levels. And this indicator gives us historic pivot levels.
For instance, here’s today’s daily pivot, daily resistance 1, daily resistance 2. This is yesterday’s daily pivot, resistance 1, 2 and 3, support 1, 2 and 3 and so on. So, we needed these indicators to show us the actual daily pivots of the previous sessions because we are going to be backtesting, well, not backtesting per se, but we are going to go through past price action or historic price action in order to show you where to look for a scalping set-ups. Now, we have the daily pivots, also we are going to use an oscillator. My default oscillator is the RSI, but you can also use a stochastic oscillator, MACD, etc.
Now, we are going to use a seven period RSI and we are going to look for, well, we are going to see if this is actually going to work or if I am going to choose an even lower period for the RSI. I wouldn’t know yet because we are on the one hour chart, okay? Now, let’s go to the five-minute chart of this session. Remember that today was not favorable so we had this huge a 140 pip spike and this is one of the reasons we are going to go through historic price action, okay? Now, I think that this session… this is actually a very good session or a very nice moment to the downside, so let’s start by looking at the daily pivots, okay?
Here we have the daily high or the session high and here we have the session low, okay? Now, let’s go to the Fibonacci properties and let’s use the default Fibonacci retracement levels. We have the high of the session and the low of the session. You can see that right here we have a movement between yesterday’s pivot and yesterday’s support one and this session’s support one. So you can see that this is actually the high of the session and the low of the session. Now, let’s calculate how many pips we have run down. And you can see that the range of the session is 1,327 points which means that this is roughly a 132 pip run to the downside. Now, let’s look for scalping opportunities right here and the first thing we are going to do is we are going to use the retracement on the daily Fibonacci levels. The first thing you can see is that we moved up to the daily support two level and we broke to the upside almost around the 50 Fibonacci level. Remember that these are not price levels, but more ranges than an actual price level.
And what we are going to do also is we are going to use the horizontal line because we want to know where are the previous lows. And this is very important while you are scalping because this is what you are looking for when you are trading a retracement. Let me just make this a little brighter and you can see that right here we have what I like to call a zone of previous lows or a previous base. You can see that price went all the way down here, this is the five-minute chart remember and the price went all the way down here, okay? Then it moved up, failed to make a previous low, then retested it, then broke to the downside. The way I know that this is a previous low or a previous base is because price broke it and then retested it as resistance. So, we have this low right here that test this area of support, then we broke it to the downside, we tested it as resistance. So, this is a very specific area that we must pay attention to. And we have a very nice confluence of this area with the 50 daily Fibonacci level. So, a price makes this low and then starts to retrace to the upside. What we are going to do here is, because we are scalping, we are not going to look for very strong confirmations meaning that we are not looking for a three bar reversal pattern or something like that. We are just looking at levels and confluence. And you can see that we are looking at this area and we are going to look for this RSI to show us something that is going to confirm the short set-up.
We are looking for this area, for a short set-up because we already told you, I already told you, I’m sorry, that this was a base we broke it, we retested it, we have a confluence with the 50 Fibonacci retracement or the 50 daily Fibonacci retracement plus we have also, let me just change the color on this, okay, that’s much better… Well, I was saying, we have the confluence of this previous base and then a retest of this area’s resistance with the daily 50 Fibonacci level and look at this, this is what the RSI is giving us.
Right here we are making higher highs. We made a higher high, a higher high and then a higher high, but the RSI is making lower highs meaning that not only we are testing a previous base in confluence with the 50 Fib or the 50 daily Fib, we have a bearish divergence on our fast RSI, meaning that all of those things together give us a very good short opportunity. And if you take the short right here, you are going to be risking about 8 pips and the first target would be around 35 pips, okay? And this is how scalping is done day in and day out. You have seen everything you have learned so far. Now, of course that, in this lesson, I wanted to show you what your set-up is going to be looking like and what you should be looking for, but in the next module we are going to go through actual set-ups and what you are really going to have to be looking for once you understand how to use all these instruments.