28 replies to this topic

[jim0120]

How do you determine the risk/reward for the powerbars? Do you use the emergency stop as the risk and the fib closest to 1.5xATR as the reward? I am wondering because I have taken a few trades so far, and my stop is always much larger than my target.

[Dan Campbell]

jim0120, on 04 January 2012 - 10:00 AM, said:

How do you determine the risk/reward for the powerbars? Do you use the emergency stop as the risk and the fib closest to 1.5xATR as the reward? I am wondering because I have taken a few trades so far, and my stop is always much larger than my target.

No, you look at where you are likely to exit the trade. I usually add about 0.5 ATR's above the blue lines. Remember, your exit will be "if a full candle paints on the opposite side of the power lines". Most of the trade will give you a chance to exit at or very near the power lines. The 0.5 ATR's is a nice cushion.

[jim0120]

Dan Campbell, on 04 January 2012 - 12:10 PM, said:

No, you look at where you are likely to exit the trade. I usually add about 0.5 ATR's above the blue lines. Remember, your exit will be "if a full candle paints on the opposite side of the power lines". Most of the trade will give you a chance to exit at or very near the power lines. The 0.5 ATR's is a nice cushion.

Ok, so let me give you an example to see if I understand. If I entered the gbpusd this morning at 1.5590, then my target is 1.5 times the 4hr ATR which would equal about 70pips. The nearsest fib to that is the 38.2, so I set my take profit at 1.5661. My emergency stop would be 0.5 ATR below where the power lines are. So my emergency stop will be 1.5420. I am likely to exit at 1.5460 (where the power lines are), so I will use that as my risk which is 130 pips. So my reward is almost half my risk. Is this correct?

[Dan Campbell]

jim0120, on 04 January 2012 - 12:46 PM, said:

Ok, so let me give you an example to see if I understand. If I entered the gbpusd this morning at 1.5590, then my target is 1.5 times the 4hr ATR which would equal about 70pips. The nearsest fib to that is the 38.2, so I set my take profit at 1.5661. My emergency stop would be 0.5 ATR below where the power lines are. So my emergency stop will be 1.5420. I am likely to exit at 1.5460 (where the power lines are), so I will use that as my risk which is 130 pips. So my reward is almost half my risk. Is this correct?

Yes, that is why I said that I would wait for it to pull back before entering. The risk reward does not make sense at these prices.

[jim0120]

Dan,
On the 4hr powerbars, the gbpusd is about 1 atr from the powerlines. Would you enter a short at this price (about 1.5475)? I don't think the usd or the gbp have made a pullback on the barometers, but I don't know if you consider that absolutely necessary.
Thanks,
Jim

[Dan Campbell]

jim0120, on 09 January 2012 - 07:21 PM, said:

Dan,
On the 4hr powerbars, the gbpusd is about 1 atr from the powerlines. Would you enter a short at this price (about 1.5475)? I don't think the usd or the gbp have made a pullback on the barometers, but I don't know if you consider that absolutely necessary.
Thanks,
Jim

No, this trade is over. The candles are mixed and Market Meter is mixed. I would leave this pair alone until it clears out of these prices. If you think it will go lower; hunt for entries on the 4 hour and 30 minute systems.

Remember, I want to see a strong consolidation before entering the GBPUSD short for a long term trade. We will probably see the rally form over the next few weeks.

[jim0120]

Dan Campbell, on 09 January 2012 - 07:41 PM, said:

No, this trade is over. The candles are mixed and Market Meter is mixed. I would leave this pair alone until it clears out of these prices. If you think it will go lower; hunt for entries on the 4 hour and 30 minute systems.

I am talking about the 4 hour system.

[Dan Campbell]

jim0120, on 09 January 2012 - 07:42 PM, said:

I am talking about the 4 hour system.

Sorry, I keep doing that, lol.... Normally this would be an excellent setup, but notice that both the USD and GBP are below 50 on the Med Term barometer. This is warning sigh to stay out. Ideally, we need both currencies to be on opposite sides of the 50 (i.e one stronger and one weaker). This pair will eventually bounce down before going higher, but it's unclear when at the moment.

These choppy markets are kind of hard to read. You've got the right idea, just remember to double check with the barometers.

[jim0120]

Dan,
Thanks for the help. Just to clarify, what would the minimum distance between the currencies be on the med barometer for a 4 hour powerbar entry? Would one at 55 the other at 45 be ok, or does one have to be above 75 and the other below 50? Thanks again!
Jim

[Dan Campbell]

jim0120, on 10 January 2012 - 09:47 AM, said:

Dan,
Thanks for the help. Just to clarify, what would the minimum distance between the currencies be on the med barometer for a 4 hour powerbar entry? Would one at 55 the other at 45 be ok, or does one have to be above 75 and the other below 50? Thanks again!
Jim

On the pull back before entry, you want one above 70 or below 30, with the other currency on the opposite side of the 50 level.