Chapter 11 – Risk to Reward Ratio

A more practical approach will be to wait until it retraces back to 1.5855, then enter with 1:1 risk to reward ratio, risking 45 pips to make 45 pips.

Better Risk to Reward Ratio Scenario

Entry: SELL EUR/USD @ 1.5855
Profit Target: 1.5810
Stop/Loss: 1.5900
Results: 45 pips of risk and 45 pips of profit = 1:1 risk to reward ratio.

 

If you wait for it to come back at 1.5870, then you are getting a 1:2 risk to reward ratio, risking 30 pips to make 60 pips.

Even Better Risk to Reward Ratio Scenario

Entry: SELL EUR/USD @ 1.5870
Profit Target: 1.5810
Stop/Loss: 1.5900
Results: 30 pips of risk and 60 pips of profit = 1:2 risk to reward ratio.

 

Always plan ahead when trading. If it does not match your plan, then do not trade. There is really no reason to take higher risk on a not ideal entry when there are so many opportunities to trade.

 

Pages: 1 2

About Kelvin Ching

I'm a professional Forex trader and I have been trading for over 7 years. I was a series 3 broker and a registered CTA with the NFA, the main regulatory agency in the United States, and I have been involved at the highest levels in commodity trading. I also have a background in Information Technology, graphics design, and programming... I'm the co-founder of CurrencyNewsTrading.com, a site dedicated to fundamental analysis and news trading.

Speak Your Mind

*

[sg_popup id=1]