Technical Analysis

Euro FX futures (6E) possible reversal on the horizon

  • Trade Setup: A potentially high-risk reward trade with a low probability of success but an early entry opportunity in trading 6E after FOMC and key US data.
  • Extracting Capital from the Market: Seeking an edge and capital extraction in the trade, despite the low chance of success, with a potentially high payout.
  • Technique: Utilizing a scalp-like approach to catch the bottom of the move, with tight risk and a target at previous highs, despite limited technical indications.

Quick recap

Last week I mentioned staying away from trading 6E, but things have changed now that the FOMC and key US data is out of the way. There looks like a potentially high-risk reward trade that has a low probability of success, but nevertheless, I want to show you what it looks like to catch a trade very early.

Think about the fact that when we take our positions, we are looking for an edge. Whether that is technically or the position size or even how we manage risk. What we are doing is trying to extract capital out of the market. In the following trade, there is a low chance of success but a potentially high payout.

The technique

This style begins first with the understanding that the chances of success are low. But the reward is big compared to the risk. We would be looking at a ratio of around 10:1 or even more in this particular setup.
The trade goes like this:

We see the potential for a reversal occurring on the daily chart, with a bullish target at the previous highs at $1,11. We take our long by treating the first few hours of the trade like a scalp. Every trade starts like a scalp if you think about it. So the idea is that we try to catch the bottom of the move by holding a very tight stop and moving to break even. Doing this will result in losses and many break-evens, which is why I don’t recommend doing it at all times.

Look at the chart below for the chart illustration. The risk is tight, just below today’s low. The target is the previous high. There are no real technicals pointing to the reversal other than the potential bullish candlestick that is forming for today’s session, but that is not the point of this setup. As I already mentioned, the likelihood of success is low, but the payout is potentially very high.

If you would like to book a trader mindset session with me, add me on discord for more information: Jay-OUP#6138