Chapter 1 Tools of the Trade
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Nirvana Systems Inc.
1-7
Profiting with Chart Patterns
you can see that if you are only half right and you make three times as much as you
lose, you are going to do very well. That is why this Reward:Risk ratio is important.
It is not a critical condition for trading these patterns, but it will really help you to only
trade the best opportunities.
Eighths Tool
We had the Eighths Tool added to OmniTrader because I was using it so much for
trading. The reason it is called an Eighths tool is because it divides a range into eight
equal parts. This tool is a very good mechanical way to manage stops in the market.
In OmniTrader, click on the Eighths tool
icon in the drawing tool bar, and then drag
it across the chart.
To drag it, click on a relative high point and pull down. As it
expands, you will see the price numbers for each line in the Eighths tool.
Figure 1-5.
Eighths Tool
Plotted as Comb for IBM
Note
I have so many examples that it is more convenient for me to use a
likeness of the Eighths tool, because I can size it in my presentation to show
the examples better. So, I am going to be using this comb as an Eighths tool.
It does exactly the same thing as an Eighths tool—divides a range into eight
equal parts.
