There is no question that spotting the beginning and end of a profitable trend, and the staying with the trend during its course, is the most difficult task. A trend can be disrupted by many other trends of different time periods because each time frame attracts different groups of interacting players. This results in convergence and divergence of the trend through different time periods.

Trends of very short time periods will be difficult to trade. In order to improve their performance, successful traders adjust their trading time frame to match their preferred holding period. The purpose is to separate the trend for the specific trading time frame from disrupting noises as much as possible. Risk is defined as the amount of money that a trader is willing to risk, and reward is the anticipated return multiple of the risk. It means if a trader is prepared to take a loss of $1 on his trade, it would be worth the risk to expect a return of $3. If a risk of $1 is assumed to be a loss of 10 percent, the projected reward should assume to fetch a return of 30 percent. The 3:1 reward to risk ratio is a good ratio to use particularly for Hong Kong stocks, which tend to go into consolidation after a rise of 30 percent. However, the risk to reward ratio is subject to the personal decision of each trader. Trading time frame analysis of setup position will identify opportunity and risk in most cases. For example, when a promising setup appears on the weekly chart, a trader ...

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