Risk Reward Pt. 2 - High RR Setups

Introduction: Understanding High RR Trades

The video focuses on how to find setups with tight stop-losses while maintaining high risk-reward (RR) ratios.

The key is to identify strong setups on higher timeframes and refine them into precise lower-timeframe entries.

Main question addressed

“Is it common to get stopped out multiple times on high RR setups before catching the move?”

Why Higher Timeframes Matter for RR Setups

Start on Higher Timeframes (3D, 1D, 4H)

Large RR trades must be based on solid high-timeframe setups.

Look for bullish divergences, key support/resistance flips, and supply/demand zones.

Example: XTZ Trade

A 3-day bullish divergence was forming, suggesting a high-probability long setup.

This set the stage for a potential breakout trade with a tight stop-loss.

Refining Entries on Lower Timeframes

Once a high-timeframe setup is found, drop to 4H & 15M to fine-tune entries.

Key criteria for entries

Identify a clear breakout trigger level.

Look for price consolidation under resistance - sign of a potential breakout.

Use momentum indicators (RSI, volume) to confirm strength.

Example: XTZ Setup Execution

On the 4H chart, a level around $1.64-$1.66 was identified as the breakout trigger.

On 15M & 5M charts, smaller price movements helped refine the exact entry.

Stop-Loss Placement for Maximum RR

Ideal stop-loss placement

Below the last consolidation before breakout.

Below a key support zone that confirms market structure.

Finding the tightest possible stop

If stop-loss is too wide, RR suffers.

If stop-loss is too tight, premature stop-outs occur.

Example

A 4% stop-loss was too wide.

Lower timeframes (15M, 5M) were used to shrink the stop-loss to under 2% while maintaining a high RR.

Handling Stop-Outs & Retrying High RR Trades

Is getting stopped out normal? Yes, because

Tighter stops = higher chance of getting wicked out before a move.

Markets don’t move in straight lines.

Key rule: If the setup remains valid, keep retrying.

Example

First breakout attempt failed → Stop-loss hit.

Price retested the level but structure stayed intact.

Second attempt succeeded, yielding a 15-20% move.

How to Recognize When to Abandon a Setup

If price moves too far below key support, the setup is invalidated.

If multiple rejections happen at the breakout level, momentum is weak.

Example with ETH

If ETH had broken 5% below the breakout zone, it would no longer be a high-RR setup.

Instead of forcing the trade, move on to a better opportunity.

Keys to Finding Large RR Trades with Tight Stops

Start with a strong high-timeframe setup (daily or higher).

Drop to lower timeframes (4H, 15M) to refine entry and tighten stops.

Look for consolidation before breakout - momentum build-up is key.

Expect stop-outs but re-enter if the setup remains valid.

Keep stops below consolidation lows, not just random price levels.