In this diagram, I attempt to portray the trading sequence as we know it now in order to preserve a correct risk/reward ratio and also a good win/loss ratio.
Notes below diagram >>>
By
tymen1 at 2008-05-09
There are 2 drawings and they look complicated at first. Lets go thro them :
Pips first trade
At A we enter short with
one amount using the KC chart method to get best entry. It is usually entered at the "open" but quite often a much better short entry is obtained. A stop loss is set near the top of the 3rd candle or above the top of the star according to our risk assessment.
A small target profit is set.
At B the target is reached and the trade is closed. The stop loss is also promptly closed. Since the price went down, the stop loss is really irrelevant.
From B to C the price retraces and we simply rest and watch.
We re-enter short with 2 amounts at C, wait for the price to fall, then shift the stop loss (D) as explained in the post above.
A much bigger target profit is set at E where
1 amount is closed, then the remaining amount is traded short according to intuition.
Retrace first trade.
At A we enter short in exactly the same way as the "pips first" trade.
At B
we frown as we see the price action going against us, going to a retracement/pullback.
At C we detect the limit of the pullback and we enter short the
2nd amount.
The computer averages the 2 entries and
we grimace as we see that our 2nd entry is still above the average and therefore we are still in the negative.
We wait for the price to fall, then shift the stop loss (D) as explained in the post above.
We set a decent target profit at E where
1 amount is closed, then the remaining amount is traded short according to intuition.
This diagram is subject to revision. 
How do we know where the retracement peaks are??
Well, there is plenty of meat to digest in the posts so far, so I will post that answer tomorrow - going shopping so I will probably post late.
Comments welcome.