Now for the final chart in the series - another 5 minute chart. Very important notes are on the chart itself >>>
By
tymen1 at 2008-05-29
This chart is very full. Lets go thro it :
The Bollinger bands are shown in blue, the grey area is now the Starc bands. The middle band is still a middle Keltner band. With the GFT program, you can mix and match all these bands as you wish.
The short entry point with 1 amount is shown again at 22
The green candles following show that the price action is going up and we declare a "retrace first" trade.
Now where is that retrace top point??
The Starc bands are going up (read important notes on the chart) and we find the retrace top where the candlle touches the upper BB. At this point the Starc also happens to touch the upper BB.
The 2nd amount is entered here at 48 and the computer averages the two entries to 35.
That is.........(22+48)/2=35 .
We must wait till the price action drops to 35 before any profit is made.
Then, as it goes down, well past 35, we
reset the stop loss to a spread distance below 35 eg set at 32 for a spread of 3 pips.
We now have a riskless trade and can go on with confidence.
Greywolf238 made an excellent exit at 06. This is the first point where the price action dropped below the lower Starc band.
Of course we could have gone further. The choice is yours.
Using the averaged entry of 35 and then exit both amounts together at 06, we have
2 amounts of 29 pips. (35-06=29)
That is, a
total profit of 58 pips. (2x29 = 58)
The initial stop loss was at 51.
Our initial short entry with
1 amount was at 22.
Now the distance from the entry to the stop loss is 51-22 = 29 pips.
That is, if we had lost this
1 amount with the trade going against us, we would have
lost 29 pips.
Now the
profit was 58 pips.
Loss potential was 29 pips.
So we have a risk/reward ratio of 1:2
This is excellent.
I trust that the details of this trade presented here will be informative and of use.