Technical Analysis Masterclass- Part 2

'Entering the trade'

Entering a trade without ascertaining a certain things is gambling.

In this masterclass we will learn the pre-requisites to enter a trade.

DON'T ENTER A TRADE WITHOUT DETERMINNG THE FOLLOWING.

Please share.

We understand what reward to risk (popularly called risk to reward) is.
It will be denoted by R:R.

We will also try to bust a few myths about R:R and how to avoid losing trades.

Before entering a trade, you need to determine 3 things.

1. Entry trigger
2. Stop loss
3. Target
1. Entry trigger = Reasons for entering a trade. There could be multiple reasons or a single reason for entry.

Generally a set of reasons AKA confluence is a higher probability trade and a generally a safer entry.

Example of an entry trigger.
2. Stop Loss.

The price in the opposite direction of the trade where the trade is exited, at a loss.

At this level, the reason for the entry becomes invalidated according to TA and the price can then move in the opposite direction, probabilistically.
3. Target is the possible price level that the asset might touch based on previous trends or confluence AND where a possible reversal could occur.

Target is the next path of least resistance from where the price might reverse.

We will always ONLY use TA to determine all 3.
A combination of the three coming together forms R:R.
We will try to understand what really R:R in this thread.

R:R simply is the ratio of the distance between entry and target, and entry and the stop loss.

Here is an example of the R:R ratio
R:R is generally denoted in ratio form such as 2:1 or 3:1.
If the target is 10% above the entry and the stop loss is 5% below the entry, the RR is 2:1

YOU SHOULD NOT BE ENTERING A TRADE UNLESS THE R:R IS KNOWN.
Myth.
A fixed minimum R:R is necessary for taking a trade.

Even Murphy in his book has advocated for the same but in my opinion it is a wrong benchmark to have.
Sticking to a fixed RR can prevent us from entering a high probability trade at times, eg at confluences.
So what is the right way to use R:R and how do traders with low Win rate turn out to be profitable?

Profitability depends on 2 factors. R:R and win rate.
Study the chart below.
The above chart describes how much R:R is needed for a certain level of win rate.
Eg. If your win rate is 50%, you will be at breakeven at a R:R ratio of 1.

The formula to calculate the same is as below.
The above might seem confusing but the crux of the matter is,
-Test your strategy
-Find your win rate
-Use only the R:R setups which suits your win rate.

Eg. Always choose a trade with R:R greater than 2 if win rate is around 33%
Conclusion.

1. Find your win rate. Choose trades with R:R which suits your win rate.
2. Base the above only on TA.
3. Never enter a trade without knowing the target and SL.
4. Don't get stuck with a fixed R:R.
The completes the Risk to reward tutorial.

It is a must use to tool to avoid trades that don't suit our win rate. This gives a HUGE trading edge as most of the lower win probability trades can be avoided.

We will learn stop loss placement next.

Please share if this was useful.

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महर्षि कश्यप की तेरह पत्नियां थीं।लेकिन विनता व कद्रु नामक अपनी दो पत्नियों से उन्हे विशेष लगाव था।एक दिन महर्षि आनन्दभाव में बैठे थे कि तभी वे दोनों उनके समीप आकर उनके पैर दबाने लगी।


प्रसन्न होकर महर्षि कश्यप बोले,"मुझे तुम दोनों से विशेष लगाव है, इसलिए यदि तुम्हारी कोई विशेष इच्छा हो तो मुझे बताओ। मैं उसे अवश्य पूरा करूंगा ।"

कद्रू बोली,"स्वामी! मेरी इच्छा है कि मैं हज़ार पुत्रों की मां बनूंगी।"
विनता बोली,"स्वामी! मुझे केवल एक पुत्र की मां बनना है जो इतना बलवान हो की कद्रू के हज़ार पुत्रों पर भारी पड़े।"
महर्षि बोले,"शीघ्र ही मैं यज्ञ करूंगा और यज्ञ के उपरांत तुम दोनो की इच्छाएं अवश्य पूर्ण होंगी"।


महर्षि ने यज्ञ किया,विनता व कद्रू को आशीर्वाद देकर तपस्या करने चले गए। कुछ काल पश्चात कद्रू ने हज़ार अंडों से काले सर्पों को जन्म दिया व विनता ने एक अंडे से तेजस्वी बालक को जन्म दिया जिसका नाम गरूड़ रखा।जैसे जैसे समय बीता गरुड़ बलवान होता गया और कद्रू के पुत्रों पर भारी पड़ने लगा


परिणामस्वरूप दिन प्रतिदिन कद्रू व विनता के सम्बंधों में कटुता बढ़ती गयी।एकदिन जब दोनो भ्रमण कर रहीं थी तब कद्रू ने दूर खड़े सफेद घोड़े को देख कर कहा,"बता सकती हो विनता!दूर खड़ा वो घोड़ा किस रंग का है?"
विनता बोली,"सफेद रंग का"।
तो कद्रू बोली,"शर्त लगाती हो? इसकी पूँछ तो काली है"।
The chorus of this song uses the shlokas taken from Sundarkand of Ramayana.

It is a series of Sanskrit shlokas recited by Jambavant to Hanuman to remind Him of his true potential.

1. धीवर प्रसार शौर्य भरा: The brave persevering one, your bravery is taking you forward.


2. उतसारा स्थिरा घम्भीरा: The one who is leaping higher and higher, who is firm and stable and seriously determined.

3. ुग्रामा असामा शौर्या भावा: He is strong, and without an equal in the ability/mentality to fight

4. रौद्रमा नवा भीतिर्मा: His anger will cause new fears in his foes.

5.विजिटरीपुरु धीरधारा, कलोथरा शिखरा कठोरा: This is a complex expression seen only in Indic language poetry. The poet is stating that Shivudu is experiencing the intensity of climbing a tough peak, and likening

it to the feeling in a hard battle, when you see your enemy defeated, and blood flowing like a rivulet. This is classical Veera rasa.

6.कुलकु थारथिलीथा गम्भीरा, जाया विराट वीरा: His rough body itself is like a sharp weapon (because he is determined to win). Hail this complete

hero of the world.

7.विलयगागनथाला भिकारा, गरज्जद्धरा गारा: The hero is destructive in the air/sky as well (because he can leap at an enemy from a great height). He can defeat the enemy (simply) with his fearsome roar of war.