The NPR Trade Checklist: Name, Position and Risk

Video: THIS TELLS YOU IF A TRADE IS WORTH TAKING
Creator: Oliver Velez Trading
Original Video: Watch the original video
Difficulty: Intermediate

The Big Idea

Oliver Velez uses NPR—Name, Position, Risk—as a decision checklist. Name the observable event, assess whether its location permits the intended trade, and calculate whether its stop fits the maximum planned loss.

The examples involve topping-tail shorts, nearby support and decisions about whether to pursue one downward leg or a larger two-leg move. The checklist organizes a decision; it does not establish profitability or make every passing trade obligatory.

If You Remember Only One Thing

A recognizable setup still needs room to move and an affordable invalidation point.

60-Second Summary

• Name an actual price event rather than an opinion about where price should go.
• Check the direction and location together.
• For a short, nearby support can restrict the available reward.
• Choose quantity from stop distance and the loss budget.
• A one-leg exit may fit a constrained trade better than waiting for a second leg.
• A deep countertrend bounce challenges the expectation of a new low.
• Passing NPR describes process consistency, not a guaranteed winning outcome.

Name: Replace an Opinion With an Observable Event

“It has risen too far” is an opinion. A topping-tail candle describes an observable shape: price traded higher but finished well below that high. Two adjacent topping tails provide repeated rejection in the creator’s examples.

Even a named event needs a definition. How long must the tail be? Must the candle close red? What size is sufficient? The transcript does not supply universal thresholds. A useful research detector can define those features openly rather than pretending its settings belong to the creator.

Position: Is There Space for the Trade?

A bearish event directly at support is different from the same event sufficiently above it. In the demonstrated short, the nearby support limits expectations. Velez therefore favors taking the first decline instead of automatically waiting for a full “whale.”

For an independent illustration, consider entry at 50, protection at 51 and support near 49.20. Gross planned risk is 1 per share, but room to that support is only 0.80: a room-to-risk ratio of 0.8. Moving the same support to 47 changes the ratio to 3. The candle shape has not changed; the available path has.

The transcript treats a powerful dual-tail event as a reason to tolerate less-than-ideal location. That exception remains discretionary. Record when you relax a location rule so the exception can be evaluated separately.

Risk: The Trade Must Fit the Budget

With $100 of planned risk and a $1 entry-to-stop distance, gross quantity is 100 shares before costs. At a $2.50 stop distance, it is 40 shares. Round down to permitted increments and allow for fees and adverse fills.

Velez describes reducing from two lots to one, or passing entirely if even one lot violates the maximum. The underlying principle is sound arithmetic, not a universal requirement to use 100-share lots. A stop defines intended risk rather than a guaranteed maximum realized loss.

One Leg or Two?

The “whale” is a first decline, an interruption and another decline. The source argues that pursuing it makes more sense when the path is not immediately obstructed by strong support. Nearby support can justify a simpler exit expectation.

A move from 100 to 90 has a midpoint at 95. A bounce to 94 retraces 40% of that decline; a bounce to 97 retraces 70%. Velez regards a sufficiently deep and forceful bounce as unfavorable for another new low. This is a proposed relationship, not a measured probability supplied in the transcript.

The midpoint alone does not resolve velocity, duration or the definition of the first leg. A research test must freeze the leg before measuring its retracement rather than selecting endpoints after the subsequent low is known.

Two Failed Attempts and Large Gaps

The creator describes an early protective exit when two downward attempts are ignored. The narration does not define every bar sequence or trigger price, so the “two color” rule cannot be treated here as a unique automated stop.

He also frames a very large gap as a possible change in the relevance of older chart history. A gap can change context, but does not literally erase past prices or prove old levels irrelevant. Size, catalyst, liquidity and new-session behavior need separate assessment; the video provides no numerical “history reset” threshold.

A Research Baseline: Do Dual Tails Benefit From More Room?

View Pine Script Backtest Code

//@version=6 strategy("NPR Dual-Tail Room Research", overlay=true, pyramiding=0, initial_capital=100000, commission_type=strategy.commission.percent, commission_value=0.01, slippage=1, process_orders_on_close=false, use_bar_magnifier=true) tailShare = input.float(0.5, "Minimum upper tail / range", minval=0.1, maxval=0.95) closeShare = input.float(0.4, "Maximum close location / range", minval=0.05, maxval=0.9) useRoom = input.bool(true, "Require room above SMA 200") minimumRoom = input.float(1, "Minimum room / ATR", minval=0) stopAtr = input.float(1, "Stop distance / ATR", minval=0.1) rr = input.float(2, "Target / stop distance", minval=0.1) maxBars = input.int(20, "Maximum holding bars", minval=1) units = input.float(1, "Fixed quantity", minval=0.001) atr = ta.atr(14) ma = ta.sma(close, 200) tailBar(float o, float h, float l, float c) => span = h - l span > 0 and (h - math.max(o, c)) / span >= tailShare and (c - l) / span <= closeShare dual = tailBar(open, high, low, close) and tailBar(open[1], high[1], low[1], close[1]) room = not na(ma) and close > ma and close - ma >= minimumRoom * atr signal = dual and (not useRoom or room) var int sentBar = na // The event is completed before an order is submitted. if barstate.isconfirmed and signal and strategy.position_size == 0 and (na(sentBar) or bar_index > sentBar) ticks = int(math.max(1, math.ceil(stopAtr * atr / syminfo.mintick))) targetTicks = int(math.max(1, math.round(rr * ticks))) strategy.entry("Tail", strategy.short, qty=units) // Relative tick brackets are submitted with entry, referenced to its fill. strategy.exit("Bracket", "Tail", loss=ticks, profit=targetTicks) sentBar := bar_index if strategy.position_size < 0 and strategy.opentrades > 0 entered = strategy.opentrades.entry_bar_index(0) if bar_index - entered >= maxBars strategy.close("Tail", comment="Time exit") plot(ma, "SMA 200 support proxy", color=color.orange)

One concrete experiment compares dual-tail shorts with and without an available-room filter. This code tests one objective interpretation of the source’s concept. Mechanical definitions introduced here are ours and are not necessarily the creator’s exact rules.

Layer	Baseline choice
Source idea	Name a tail event and examine room above support.
Our event definition	Two adjacent candles, each with upper tail at least 50% of range and close in the bottom 40%.
Our location proxy	Price above the 200 SMA with at least 1 ATR of distance.
Implementation shortcut	Fixed quantity, 1-ATR stop distance and 2R target; no event-high stop or whale management.

What This Code Actually Tests

The script enters short after the completed two-candle event, normally at the next bar’s open. It freezes a stop distance in ticks from signal-time ATR and submits relative stop/target orders with the entry. Those distances are measured from the simulated fill, not the signal close. Tick rounding can make the exact target ratio differ slightly from its input.

The optional filter measures distance above the SMA, not the nearest actual support zone. It is a simplified location experiment. One position is held at a time, and eligible events while invested are skipped. The maximum holding threshold submits a market exit for the next available tick.

What This Code Does Not Test

It does not implement the full NPR checklist, the source’s event-high stop, fixed-dollar risk sizing, single-tail setups, partial exits, breakeven changes, whale completion, bounce velocity, two failed attempts or gap-based reinterpretation. Fixed quantity is not fixed account risk. An ATR bracket is intentionally used to keep exits consistent while studying the room filter.

Execution and Validation

The baseline avoids fill recalculation and bases new decisions on completed bars. Brackets are submitted with each entry; later signals do not change their frozen distances. Bar Magnifier is enabled, but available intrabar data and broker-emulator assumptions still affect ambiguous stop/target bars and gap execution.

Illustrative costs are 0.01% commission per order and one tick slippage, adjustable in Properties. Borrow and financing costs are not modeled. Use ordinary candles and an appropriate position unit for the instrument.

Validation status: This script has not been compiled in TradingView or run against historical data here. No performance results are claimed.

Backtest Lab

Question	Change	Keep fixed
Does room help?	Filter off/on; minimum distance 0.5, 1, 1.5 ATR.	Tail definition, exits, dates and costs.
Does rejection shape matter?	Minimum tail fraction 0.4, 0.5, 0.6.	Location and management rules.
How sensitive are exits?	1R, 2R, 3R targets.	Same signals and stop distance.

Compare trade count, expectancy, drawdown and average holding time. Include excluded signals and reserve untouched evaluation data. More room can reduce the number of trades without necessarily improving their outcomes.

Try It Yourself

For ten historical candidates, record the event name, first opposing zone, stop, quantity and planned reward before revealing the outcome. Classify each as a one-leg idea or a two-leg hypothesis. Explain disagreements between that judgment and the SMA-based filter.

Check your understanding: Why can a named event still fail NPR? Its location or risk can be unsuitable. Does passing all three checks prove an edge? No; that requires evidence across a complete sample. Does a 70% bounce guarantee no new low? No; it challenges an expectation rather than determining the future.

Final Takeaway

NPR turns a vague trade idea into three concrete questions: what happened, where did it happen, and what loss is planned if the idea fails? The deeper lesson is to match management expectations to the available path. The next useful experiment is whether an explicit location rule improves a consistently defined event after costs.

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Risk Disclosure: This material is for educational and research purposes only and is not investment advice. Trading can result in substantial losses. Backtests are hypothetical and depend on costs, liquidity, gaps, order behavior and intrabar assumptions. Actual execution and market changes can materially alter outcomes.

This article is an independent educational companion to the video and is not affiliated with, sponsored by, endorsed by, or authorized by Oliver Velez Trading.