Chart Fanatics
July 17, 2026
High Risk-Reward Entry Strategy Using Lower Timeframe Confirmation
TL;DR
A trader demonstrates how to improve risk-reward ratios by using lower timeframe confirmation entries instead of accepting large stop losses on higher timeframes.
Key Takeaways
- 1Large stop losses kill risk-reward (RR) ratios; identify confirmation entries on lower timeframes to reduce stop loss size
- 2Use liquidity zones and price action patterns (like DaVinci formations) to pinpoint high-probability entry points
- 3Entry confirmation comes when price action creates a low that can be stabbed with a smaller stop loss below it
- 4Combining higher timeframe targets with lower timeframe entries enables significantly better risk-reward setups (1:12 or higher)
Chapters
1. The Problem: Large Stop Losses Kill Risk-Reward
When analyzing higher timeframes, traders often face large stop losses that make risk-reward unfavorable. The presenter explains why simply accepting a poor RR ratio is not viable for profitable trading.
2. Identifying Liquidity and Future Targets
The presenter maps out engineered liquidity zones and identifies highs that will serve as future targets, establishing the directional bias and upside objective.
3. Lower Timeframe Confirmation Entry
By zooming into the 1-minute chart, the trader identifies choppy price action and a DaVinci formation. The entry is triggered when the low is stabbed, with the stop loss placed just below that level.
4. Achieving Superior Risk-Reward Ratios
Using the tighter stop loss from the lower timeframe confirmation while maintaining the higher timeframe target results in an excellent 1:12 risk-reward ratio.
Glossary
- Risk-Reward Ratio (RR)
- The ratio of potential profit to potential loss on a trade; a 1:12 RR means risking $1 to make $12
- Liquidity Zone
- Price levels where significant buy or sell orders are concentrated; traders target these zones as price often moves there
- DaVinci Formation
- A price action pattern on lower timeframes that signals a potential reversal or continuation
- Confirmation Entry
- A trade entry triggered by a secondary signal on a lower timeframe, confirming the higher timeframe bias
- Stop Loss
- The price level at which a losing trade is automatically closed to limit losses