So here, I'm going to tell you how you can determine the risk and reward when you take treats on the
basis of Hemer candlestick pattern.
See, we have seen that the candlestick patterns with filters, they will give you a high probability
tree.
So you expect your seven out of 10 traits to be winners.
And of course, when we say that, we expect that two to three of our troops are going to be losers.
So we have to not only plan for the exit in profit, but we have to decide when we are going to existing
laws because all of them are not going to be winners.
And we cannot just hold on to these losers hoping that the market will turn to our side.
So, no, that does not happen in market.
You have to learn to take trade losses if you want to survive in this game for longer.
And so you have to prepare this mentality that there are going to be losers and there are losers.
I am going to exit in losses and how you have two existing losses, I'm going to tell you in this particular
video.
So we have to find out what is going to be our restore order.
It is reward is nothing, but this is nothing but the losses that we are going to take and the world
is nothing but the profit that we are going to have.
So we have to decide how we are going to take our losses and how we are going to take our profits when
we are going to book our profit and losses.
So once you initiate the position, so you have initiated the positions, for example, long position
by position, we have to place a stop loss.
Stop loss is nothing.
But it's an order which is used to reduce your losses for the losses that happen.
So you have to use a stop loss order below the level of loss candle.
That is one ETR below.
I'm going to tell you, this is an indicator, basically average range.
It is an indicator which tells you average range of a particular stock.
So on an average, what is the range of that stock or a period of 15 to 20 days?
That is what it tells you.
So in other words, it tells you how volatile that stock is and what is the range of that particular
stock.
So we are going to play a stop loss on the basis of ETR, which is nothing but one if they are below
the last candle.
So whatever it is, the low of our hammer below that, when we are away, I'm going to tell you practically
how it is to be done on charts.
So these are we your to play stop loss and how you are to place Target where you will exit Target will
be next immediate resistance.
So you should understand the concept of support and resistance again uncharged.
I will give you an overview of that.
So whatever is the next resistance to that particular stock, that is where we will have our target.
So we have calculated the risk.
We have calculated the reward and the risk reward should be at least one is to one.
So we are taking a risk of one rupee and we are taking the word of one rupee that that should be minimum.
So it should not be.
We are taking a risk and reward of zero point eight.
No, that's an unfavorable risk to reward.
It should be at least one is to one.
But in most of the cases you'll find that it is more than one is to one low risk of one and reward up
maybe one point five, one point four.
That is always good, but not be less than one is two one.
So let's go on to those two charges that we have seen and and marquises again.
Let's see how we can do this.
So this is where you can see chart of Maruti Suzuki.
The first of all, I will explain the concept of support and resistance.
The resistance basically is a price level which resists prices to go up.
So let's see this.
This is a resistance to the market.
Can you see this is the resistance.
This level is resisting market to go.
Further up, this is again, resistance distance, you can see the market went up and then went down
from this level.
So similarly, you can see this level, this level is acting as a resistance market is going up, but
it is not going beyond this point.
That's why it is called resistance.
You can find this one.
This is, again, the point from where the market is not going up.
This is, again, a resistance.
So these are nothing.
But resistance is when support is involved.
Support is where from where prices are not going down.
So this is a support market is falling, but it is not going below this point.
Again, the same point is become support for this.
So this is a support.
This is a support.
So in other words, you can say it's a price level from which the market has reversed sharply that that
is called support.
So this is the logic behind support and resistance.
And we have seen in this example that we saw Whammer getting formed on this Zuki.
This is our hammer.
It has come in falling market.
Next can be green.
We can go along on this.
So, uh, how you can determine the risk reward.
First of all, let's find out what is the lowest point of this Candleshoe.
So this is the low of the candle here.
So seven thousand two hundred almost.
This is the low.
So we have to place our stop loss below one ETR of this low.
So for this, we will use ETR indicator.
We have to this is a trading platform which is free.
Of course anybody can use free of course on trial.
Virgin is there.
So here you are to go to effects and you have this indicator average to range.
If it is not visible you can just type average who range.
It will come here.
We just have to click on this and when you click on this, it will block ETR indicator.
So it indicates what is the average range of the market over a period of 15 to 20 days.
So we are talking about this point at this point over ETR was you can see almost 190 on the right hand
side.
You can see that ETR was one ninety.
So we have to place a stop loss below this one ninety point sixty one thousand two hundred minus one
ninety seven thousand two hundred minus one nine zero.
So that is seven zero one zero seven zero one zero will be our stop loss.
Seven zero.
You can plot it and then adjust the data points, your coordinates, seven zero one zero.
So this is where we will exit in case the market goes down.
Let's look at red color.
So this is my risk.
And what will be the reward?
As I told you, that next immediate race.
And so what is the next immediate resistance?
So this is basically this level is the next immediate instance.
You can expect the market to go at least up to this level immediately.
So let's see, uh, this is where we will exit the seven eight five eight.
Let's make it a round figure for calculation purposes, although I don't advise to enter an exit at
round figures.
But yes, for our understanding, we will have this.
So this is our profit target and make it with green.
So we are going to enter at this point.
This is going to be loss.
This is going to be our target.
Let's now calculate the risk reward here.
You can use the risk reward tool for long and short position.
I'm going to use it for long position.
This is where we are going to enter to click here.
And this is the Rizwana portion.
So at this to this point, reward, at least to this point, and it will automatically calculate what
is the risk reward.
So here you can see it is the word of this one is to one point something one point I'm not able to see
properly, but yes, it is above one.
So this is a favorable risk to reward.
We are taking this one and we are taking the word of more than one.
So in this case, it is a good but we can go for it.
So this is how you can calculate risk reward.
Let's again calculate it for a little quickly.
Now, we have seen that this is the hammer that we had formed.
This is the low.
Low is one five two two and eight are in this case is fifty one point one five double to minus 50.
That is one four seven two one four seven two will be our risk.
One four seven two.
This is our exit point.
And this candle is green.
So it's goodbye.
And next, resistance is this.
You can see prices have reversed from this point.
So this is our next reason we can exit at this point.
Let's make it green.
And we had entered at this point where the candidate on Green 201 green here, this is what is the point
where we are going to enter.
This is going to be the risk.
This is going to be the reward.
And you can see this reward of one is two five.
So that is a, again, favorable risk to reward.
You can take this.
And yes, in this case, target was achieved within eight to 10 days.
So this is how you can calculate the risk to reward ratio to determine whether you have to enter in
this position or not.
If it is not favorable, then you have to see.
What we are doing logically here is that we know that our rates are going to be winners and our three
tricks are going to be losers.
So where does this reward of seven?
This one is to one.
Then in seven trades we are going to own, say, for example, seven dollars and three trades.
We are going to lose three dollars.
So ultimately we are going to be in plus four dollars, let's suppose brokerage and taxes of seven dollars.
So ultimately we are going to be positive three dollars at the end of 10 trades.
That is the logic we are using here.
So even if it is one is to one, since our success rate is higher, our probability of success is higher
over a long period of time.
This kind of filter, it is going to turn your accountant green and you are going to earn money if you
follow this.
So I hope you have understood this logic.
People fail using candlestick analysis because they do not use such kind of filters.
They don't use risk reward, they don't use other filters that we have seen that in the market is falling
and we are too.
So they don't use these filters and then they fail using candlestick.
And this is what now you know how to exactly trade the candlestick patterns.
This particular filter we are going to use almost for all the for all the candlestick pattern that we
are going to see in incoming incoming videos.
OK, so we have understood this.
Let's move on to the next reversal pattern.