The Authority’ on Price Action Trading. In 2016, Nial won the 2015 trading forex platform 19 rubber Dollar Trader Competition.
If you do know how to use it, then this lesson will be a good refresher and reference guide to the power of RR and how to make use of it on your charts. You have to make the tool yourself by changing the properties on the Fibonacci tool, which I will show you exactly how to do shortly. RR targets based on stop loss distance. 1:2 it means you have a potential 2R reward on the trade, or the reward is 2 times what you have risked. The RR tool helps you see if a trade makes sense to take. You overlay the tool on the setup you’re considering, measure the stop distance and then find the potential reward levels on the charts.
If they don’t make sense based on the surrounding market structure and price action, we might think twice about entering the trade. Step 3 is where you will actually begin to adjust the Fibo settings according to the particular trade setup you are considering, in order to find the risk reward levels for the trade. For example’s sake, we are going to use a pin bar signal with a stop loss just below the pin bar’s low and a buy entry just above the pin bar’s high. In this case, we want to delete out all the levels except the 1 or 100 level which should mark your entry level and the 0 level which marks your stop loss level. 1R risk amount on the trade setup. You can now easily add your 1R, 2R, 3R etc.