Now to finish the long engulfing trade example :
My answer to "Can you see it"
The red candle in the last post, together with the 2 candles before it, comprise
......yes.....an evening star pattern.
Now it is not on the BB, but with advanced trading, you would consider the pips made so far as a
break even if the evening star went pear shaped.
But as it is, you can see below that the trade turned out excellent - so add another 60 pips to our 60 pips from the engulfer.
Total 120 pips in one run!!
OK, last chart - main chart >>>
By
tymen1 at 2008-07-24
As I said, the evening star turned out excellent.
I am sure you could have made much more than 60 pips with the multiple amount method but I am being conservative to account for spreads and human error.
Lets look at the pips/hour.
The number of pips listed is 77.
We have reduced that to 60.
140 minutes to trade is correct.
So.......for 5 mini-lots per pip we have........$5 USD per pip.
At 60 pips = $300 USD.
Excellent I say!!
Rate of pay is $300 in 140 minutes
That is $128 per hour.
Risk/reward
Reward = 60 pips.
Stop loss at 1st and only retrace - place at 3 pips below lowest candle wick at 103.81 (81)
This would be the largest stop loss you would place.
(As the trade was, the retrace trade was never in any danger.)
Entry made at 104.14 (14)
Difference = 33 pips. That is 104.14 - 103.81 = 33
So risk/reward at worst = 33/60
Which is approx 1:2
Which is excellent.
Now with the evening star added on we can calculate :
Total time = 5.25 hours.
120 pips (conservative) in that time.
That is $600 USD if 5 mini lots in 1 amount was used.
That is $114 USD per hour.
Now my final question :
Do you still want to trade long term time frames?
Next post tomorrow.
An in depth analysis of trader types for this trade.
After that I will not go on until Vulcan Classic has his Dealbook problem solved.