Retesting a broken daily level on EURUSD, the scalp I wait all morning for

[Fairman]

Retesting a broken daily level on EURUSD, the scalp I wait all morning for

daily levels matter more than the small ones, and when one breaks, there's usually a retest. I mark the previous few days' highs and lows on H1, and during the morning I wait for one of them to break.

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When price breaks a daily level with a strong M5 candle close, I don't enter. I wait for price to come back to the level from the other side. If a daily low breaks, I wait for a rally back up to it, and I look for a rejection candle there. That's my short entry, with the stop above the retest high. Target is the next daily level or a multiple of my risk.

It might take an hour or more for the retest, and often it doesn't come. That's fine. I'm not chasing it. The ones where the retest does come are cleaner than anything else I trade, because the level is obvious and my risk is small.

The break needs to be convincing. A barely closed candle through the level is more likely to be a fake. I want a decent body and, ideally, some follow through before the pullback.

[Fairman]

Someone asked what convincing looks like for the break. For me the M5 candle has to close beyond the level by a decent margin, roughly a third of its own range or more, and ideally the next candle does not snap straight back inside. If the close is only a pip through and the wick is longer than the body, I treat it as a probe, not a break. Those are the ones that reverse and trap people. I would rather miss a real break than trade the retest of a fake one, because a fake break means the retest is not a retest at all.

[PTScalper]

Someone asked what convincing looks like for the break. For me the M5 candle has to close beyond the level by a decent margin, roughly a third of its own range or more, and ideally the next candle does not snap straight back inside. If the close is only a pip through and the wick is longer than the body, I treat it as a probe, not a break. Those are the ones that reverse and trap people. I would rather miss a real break than trade the retest of a fake one, because a fake break means the retest is not a retest at all.

Hi Fairman,

do you watch only one timeframe? I mean that M5 and nothing else?

From my perspective M5 is not bad, but i prefer combination of M15 with H4.

[Fairman]

On waiting an hour or more, I set an alert just beyond the level on the retest side and go do something else. Staring at it made me take early entries where price was only halfway back. The alert means I only look when price is actually at the level, and then I judge the rejection candle with fresh eyes. If the retest comes too late, like after the London session has gone flat, I am less keen because there is less follow through in the afternoon. Morning breaks with a retest before lunch are the ones I like most.

[Fairman]

I also keep an eye on how price comes back to the level. A slow grinding rally with small candles into the broken low is what I want to see, because it looks like a lack of buyers rather than real demand. If price comes back with a big impulsive candle that slices straight through, the level probably was not respected and I skip it. That difference in how the retest arrives tells me more than the rejection candle itself sometimes. The chart in the first post is the clean version, real ones are rarely that tidy, but the idea holds.