Speaker 1: Hey tutors, how to measure risk to reward for your trades? How to know which trades are appropriate for taking and which trades are better to skip? In this video, I will show you a very nice discussion with my students concerning risk to reward analysis. I will show you the real example on how we measured risk to reward together and how we made very peculiar conclusion. Don't forget to like this video, subscribe to my YouTube channel, and let's start. Pound-dollar, let's open the three-days chart first. I want you to realize that pound-dollar here is approaching this major structure cluster, very strong one, yes, and taking into consideration that the market is trading in a bullish trend, of course, most likely from that yellow zone we will see a strong bullish swing to new structure highs. So we are very bullish on pound-dollar, yes, and of course the retest of that structure, the recent retest of that structure made me very bullish. If we open a daily time frame, and if we open a daily time frame, we can see in details how the price just recently retested that key level. Look at this brilliant dodgy candle right here, yes, look how sweet it is, how brilliant it is, and how nice rejection we got right here. Also, by the way, even though we are bullish right now on the pound-dollar, we must remember that for now the peers tends to set the low highs, yes, and here based on the low highs, we can spot this trend line, yes, quite strong major trend line, and in case, of course, if we see the bullish rally, yes, it will be the closest major resistance. So with all that being said, you can see that on hourly time frame, the price even gave us a very nice confirmation. The price here formed the perfect example of the inverted head and shoulders pattern, yes, you can see how cute this pattern is, and of course this inverted head and shoulders increases the chances that the peer will grow, that the peer will go to higher structure levels, and yeah, and you may say that, why not to buy the peer then? Main problem right here is risk-to-reward analysis. What do we mean by the risk-to-reward analysis? Here if we take a long trade, we must consider the closest structure level for our initial target, yes, we need to spot the closest strong structure where we will start protection of our trading position, and our closest structure is right here. You can see that this structure looks quite strong, yes, so this definitely will be our first target in case if we buy the market. At the same time, where will be our stop loss in case if we buy the retest of this broken neckline of the inverted head and shoulders pattern? Look left at structure, let's open for over. The main point is that if we pay close attention to the price action right here, you can see that for now the price didn't manage to retest our current level. Yes, the growth started from a bit higher level, so we are to make our position risk-free, not risk-free, to make our position safe. It is highly preferable for us, as you know, to set our stop below the structure, and our structure is quite far from the neckline level, and setting our stop right here and our first target right here, you can see that we get negative risk-to-reward. It means that once the price reaches the first target, we tend to win less than we may potentially lose. You can see that we have 0.8 risk-to-reward right here. And according to our rules, such a risk-to-reward is not appropriate for us for trading. So again, I say that again, here we can easily make a forecast, we can easily make a prediction that the pair will grow, that most likely at least this 1.36 level will be reached. But at the same time, if trading the pair safely, setting our stop based on our rules below the key level, you can see that the risk-to-reward for this trade is not that good. So we skip the trade, making the forecast. All right, traders, so the point that I'm trying to make is that before you open any trade, before you open a trading position, you must know exactly where's your safe stop loss and where's your target, and then you execute the so-called risk-to-reward analysis. Your reward must be strictly bigger than your risk, only then you can trade. If the risk is bigger than the reward, you have the so-called negative risk-to-reward, and it is highly preferable to skip the trade. That is how we execute the so-called risk-to-reward analysis. For more education, for more tips, join my premium educational group, the link in the description below. Like this video, subscribe to my YouTube channel, and I will see you soon.