Long and short position (risk/reward)

Идея простыми словами

Before a trade, decide where you are wrong (stop) and where you take profit (target). If the possible gain is at least twice the possible loss, you can be wrong more often than right and still come out ahead over many trades.

Как считается

Click the entry. Drag the target and stop handles to your levels and the right edge to your time horizon.

Risk = |entry − stop|
Reward = |target − entry|
Risk/reward = 1 : (reward ÷ risk)

Как использовать

• Look for setups with reward at least 2× the risk.
• Work out position size from the risk: money you accept to lose ÷ risk per unit.

Выводы

• A 1 : 3 trade needs to win only a little over one time in four to break even (ignoring costs).

На что обратить внимание

• The plan is only as good as your discipline in following it.
• Costs (spread, commissions) reduce the real reward.

Немного истории

Risk/reward planning is a basic rule of trading risk management.