Targets and Risk Management

Target Levels

Primary Target: Draw on Liquidity

Source: Bias AI

The primary target is the draw-on-liquidity level identified by Bias AI:

Setup Direction	DOL Target	Description
Long	PDH (Previous Day High)	Resting buy-stop liquidity above the prior session high
Short	PDL (Previous Day Low)	Resting sell-stop liquidity below the prior session low

The specific price level is read from the Bias AI horizontal line on the chart. This is the level the strategy expects price to reach after the hunt and OB retracement.

Secondary Target: Session Extension

Source: Session Hunt AI

The session extension level from Session Hunt AI provides a secondary target when:

• The DOL is far from the entry (extended R:R), and a partial profit at the session extension is prudent.
• The session range expands beyond the initial hunt, suggesting momentum may carry price further than the DOL.

Direction	Extension Target
Long	Session Hunt AI re-extension high
Short	Session Hunt AI re-extension low

The secondary target is informational in V1. It appears in the targets array for the trader's reference but does not affect setup validation.

---

Stop Loss

Calculation

The stop loss is placed beyond the order block that defines the entry, offset by the ATR buffer from OB AI.

Direction	Stop Placement	Formula
Long	Below OB low	stop = ob.low - atr_buffer
Short	Above OB high	stop = ob.high + atr_buffer

ATR buffer: Read from the OB AI ATR banner. The atrsize field provides the stop distance in points. The stop_ticks field provides the same value in ticks for the specific instrument.

Example

Long setup on ES1!:

• OB low: 5872.50
• ATR buffer (atrsize): 2.25 points = 9 ticks
• Stop: 5872.50 - 2.25 = 5870.25

The ATR buffer prevents the stop from sitting exactly at the OB edge, where it would be vulnerable to a wick that touches the OB without invalidating it.

Stop in StrategyFlags

{
  "structure": {
    "atr": {
      "stop_points": 2.25,
      "stop_ticks": 9,
      "position_size": 2,
      "risk_dollars": 102.50
    }
  },
  "decision": {
    "stop": 5870.25
  }
}

---

Risk-Reward Calculation

Formula

R:R = |target - entry| / |entry - stop|

The calculation uses absolute values because the direction is already known. The formula applies identically for long and short setups.

Minimum Requirement

Minimum R:R: 2.0

Any setup with R:R below 2:1 is rejected as a no-trade, regardless of confluence score. This is a non-negotiable risk management constraint.

PASS: risk_reward >= 2.0
FAIL: risk_reward < 2.0 → no_trade_reason: "insufficient_rr"

R:R by Entry Tier

Since the three entry tiers have different entry prices but the same stop and target, they produce different R:R ratios:

Tier	Entry Distance from Stop	R:R
Aggressive	Widest	Lowest (but must still exceed 2:1)
Safe	Moderate	Moderate
Conservative	Narrowest	Highest

If the aggressive tier does not meet the 2:1 minimum, the strategy checks whether the safe or conservative tiers do. If any tier meets the minimum, the setup is valid (the configured tier determines the primary entry, but all tiers are reported).

Multiple Targets

When both primary and secondary targets are available, the targets array includes both with their individual R:R:

{
  "targets": [
    {"level": 5890.25, "label": "PDH", "rr": 3.2},
    {"level": 5895.50, "label": "session_extension", "rr": 4.1}
  ],
  "risk_reward": 3.2
}

The top-level risk_reward field always reflects the primary target (DOL). Secondary targets are supplementary.

---

Position Sizing

Source

Position size is read directly from the OB AI ATR banner. The QTY row computes the recommended number of contracts based on:

• Account risk parameters configured in the OB AI indicator settings.
• The ATR-derived stop distance.
• The per-contract tick value for the instrument.

StrategyFlags Output

{
  "structure": {
    "atr": {
      "position_size": 2,
      "risk_dollars": 102.50
    }
  },
  "decision": {
    "position_size": 2
  }
}

The risk_dollars field shows the total dollar risk at the recommended position size: position_size * stop_ticks * tick_value.

Position Size Limits

V1 does not enforce position size limits (it is decision support, not execution). However, the StrategyFlags include the recommended size for human review. Future phases will enforce:

• Maximum position size per instrument.
• Maximum total portfolio risk across all open positions.
• Daily loss limit kill switch.

---

Complete Risk Profile Example

Long setup on ES1!:

Parameter	Value	Source
Entry (safe tier)	5873.50	OB AI FVG safe level
Stop	5870.25	OB low (5872.50) - ATR buffer (2.25)
Primary target (PDH)	5890.25	Bias AI DOL line
Secondary target	5895.50	Session Hunt AI extension
Risk per contract	3.25 points = 13 ticks = $162.50	Entry - Stop
Reward per contract	16.75 points = 67 ticks = $837.50	Target - Entry
R:R	5.15:1	Reward / Risk
Position size	2 contracts	OB AI ATR banner QTY
Total risk	$325.00	2 * $162.50
Total reward (primary)	$1,675.00	2 * $837.50