[B]I now wish to go back to that engulfer trade that we looked at and analyse some profit taking.[/B]
Firstly, a reminder of the trade >>>
By tymen1 at 2008-07-24
The long engulfing pattern is in the middle of the chart (green) on the lower BB.
The lowest wick value is 84 (103.84)
At the end of the trade 77 pips were made in 140 minute with the [B]UM[/B].
But what if we used a simpler approach that would be suitable for total candlestick beginners?
Lets have a look…
[U]
Simple one amount trading[/U]
If we had entered this trade with only 1 amount at the open (no KC chart) and closed at the very top, we would have made [B]40 pips[/B].
Entry was 97 (103.97)
Exit at very top was 37 (104.37)
Now a stop loss would be placed 3 pips below the lower wick at 81 (103.81)
Entry - stop loss is 97-81 = 16 pips
Profit = 40 pips given above.
Therefore, [B]risk/reward [/B]is 16:40 = [B]1:2.5[/B]
[U]Improve using the KC chart.[/U]
If we traded as above but entered using the KC method, we would have made [B]43 pips[/B].
[U]Improve using multiple amounts.[/U]
If we traded as above (using KC), but entered 2 amounts and closed 1 amount at 10 pips, we would have made [B]53 pips[/B].
[U]Improve using the [B]UM[/B][/U]
We would have made [B]77 pips[/B] as stated above.
The [U]worst [/U]risk/reward in this case…copied from post #925 on page 93…
So [B]risk/reward[/B] at worst = 33/60
Which is approx [B]1:2[/B]
Which is excellent.
So you can now see the progressive improvement in pips gain culminating in the [B]UM[/B].
We improved the pip gain from 40 to 77 - a 93% improvement.
And the risk/reward ratio changed only from 1:2.5 to 1:2, a 20% change.
[U]The [B]UM [/B]provides a real alternative to long term trading whether thro candlesticks or indicator trading.[/U]
[B]So…
Who would like to change to long term trading?[/B]
