Riskreward
⚠️ Risk Management Examples Showcase📍What Is the Risk/Reward Ratio?
The risk/reward ratio marks the prospective reward an investor can earn for every dollar they risk on an investment. Many investors use risk/reward ratios to compare the expected returns of an investment with the amount of risk they must undertake to earn these returns. A lower risk/return ratio is often preferable as it signals less risk for an equivalent potential gain.
📍Consider the showcased example:
An investment with a risk-reward ratio of 1:3 suggests that an investor is willing to risk $100, for the prospect of earning $300. Alternatively, a risk/reward ratio of 1:4 signals that an investor should expect to invest $100, for the prospect of earning $300 on their investment.
Traders often use this approach to plan which trades to take, and the ratio is calculated by dividing the amount a trader stands to lose if the price of an asset moves in an unexpected direction (the risk) by the amount of profit the trader expects to have made when the position is closed (the reward).
It is very important to calculate your R:R before entering a trade. Sometimes the trade might not be worth the amount you're risking vs the reward you can get.
👤 @AlgoBuddy
📅 Daily Ideas about market update, psychology & indicators
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Fantom outperform Bitcoin?Hello
I'll start to make once per week update from some chart now on, so better stay tuned.
Fantom looks really good against Bitcoin as long as price stays on top of that key level which I marked clearly with arrows .
You can see from the chart what happened last time it broke that level.
If we can't hold the level I let my risk managment do the work and look for new opportunity if the price comes back on top
We can also break and retest the level which actually happens quite often if you stay patience
Ethereum has also been outperforming Btc for 2 weeks now so that would support this and maybe move some money to alts. Everything depends of the Bitcoin Dominance chart.
Let's check some bigger time frame also
Not financial advice
If you do take trades always use stop loss!
1st mistake novice traders do I don't use them and their ass burned!
Check out my previous work "I think bottom is in"
-Palén
Early entry *High Risk* trade 3HR BEFORE NEWS. Lets seeDXY Found support And I'm news positive on PPI AND jobs claims. High RISK ALERT!!
-not a financial advice please do your own research.
Continuation Wedge (Bullish) | 37% move possibleDirexion Daily Dow Jones Internet Bear 3X Shares forms bullish "Continuation Wedge" chart pattern
"Continuation Wedge (Bullish)" chart pattern formed on Direxion Daily Dow Jones Internet Bear 3X Shares (WEBS:NYSE). This bullish signal indicates that the stock price may rise from the close of $20.30 to the range of $27.00 - $28.50. The pattern formed over 15 days which is roughly the period of time in which the target price range may be achieved, according to standard principles of technical analysis.
Tells Me: After a temporary interruption, the prior uptrend is set to continue.
A Continuation Wedge (Bullish) represents a temporary interruption to an uptrend, taking the shape of two converging trendlines both slanted downward against the trend. During this time the bears attempt to win over the bulls, but in the end the bulls triumph as the break above the upper trendline signals a continuation of the prior uptrend.
Bullish wedge on FHB, with reasonable RRstrong bullish wedge pattern right now in daily candle; FHB has very good fundamentals in Regional banking and is positioned well to make a strong recovery
I have a 3% equity long right now in FHB
Simple Math Defies Logic"The ones who make the most money lose the least when they are wrong"
Let's use a scalping trading style for example
Say you have a set risk reward ratio of
-10 pips for being wrong
+30 pips for being right
Start trading
Loss
Loss
Loss
Win
Loss
Loss
Loss
Loss
Loss
Win
Loss
Loss
Loss
Win
Win
Loss
Loss
Win
Loss
Loss
Wow, a lot of losses, but hold on.... You have the same amount of money you started with, minus maybe a small bit on commission.
How does that happen?
Let's put the running total (pips) next to each trade
Loss -10
Loss -20
Loss -30
Win 0
Loss -10
Loss -20
Loss -30
Loss -40
Loss -50
Win -20
Loss -30
Loss -40
Loss -50
Win -20
Win +10
Loss 0
Loss -10
Win +20
Loss +10
Loss 0
Final for the day = 0 ( -1.5 - 2.5 pips for commissions)
Accuracy rate: 30%
So in simple terms, by just using a simple risk management set up that allows you to win more than 1x the risk, you do not have to have a very high accuracy rate in order to make even a small profit.
It is very difficult to keep your mind in check about this simple math, because we look at each trade on it's own, instead of looking at a series of trades (for a day/week/month) to judge performance. Keeping the overall picture in mind, and just making sure you do not allow more risk on a position than you planned, and most cases you will begin to see an improvement on trading.
By not using stops, losses can quickly mount up, because losing streaks happen. Stick to the plan, and let your mind just sit in the corner mad about the stop rules (Ignore the feeling, like a 2 year old that didn't get ice cream, or because they weren't right, & just remember the math).
*If you move your stop, one of two things apply:
You are either finding more support for the idea, just a bad entry. Move the stop to what you would risk as an additional position had you taken the trade from the spot you decide to move the stop from, and count it as two trades.
If you had a small stop, but not the maximum risk you allow on the idea, then move it no further than you planned to risk as a maximum for a single trade.
Moving a stop because you have a reason is OK, just COUNT IT, and MAKE SURE you have a REASON to do so.
DO NOT just move it because you don't want to lose, or you will take out your own account very quickly.
⚠️ Risk:Reward & Win-Rate CheatsheetThe reward to risk ratio (RRR, or reward risk ratio) is maybe the most important metric in trading and a trader who understands the RRR can improve his chances of becoming profitable. Basically, the reward risk ratio measures the distance from your entry to your stop loss and your take profit order and then compares the two distances. Traders who understand this connection can quickly see that you neither need an extremely high winrate nor a large reward:risk ratio to make money as a trader. As long as your reward:risk ratio and your historical winrate match, your trading will provide a positive expectancy.
🔷 Calculating the RRR
Let’s say the distance between your entry and stop loss is 50 points and the distance between the entry and your take profit is 100 points .
Then the reward risk ratio is 2:1 because 100/50 = 2.
Reward Risk Ratio Formula
RRR = (Take Profit – Entry ) / (Entry – Stop loss)
🔷 Minimum Winrate
When you know the reward:risk ratio for your trade, you can easily calculate the minimum required winrate (see formula below).
Why is this important? Because if you take trades that have a small RRR you will lose money over the long term, even if you think you find good trades.
Minimum Winrate Formula
Minimum Winrate = 1 / (1 + Reward:Risk)
👤 @AlgoBuddy
📅 Daily Ideas about market update, psychology & indicators
❤️ If you appreciate our work, please like, comment and follow ❤️
Symmetrical Continuation Triangle (Bullish) | 18% move possibleiShares MSCI Europe Financials ETF forms bullish "Symmetrical Continuation Triangle" chart pattern
"Symmetrical Continuation Triangle (Bullish)" chart pattern formed on iShares MSCI Europe Financials ETF (EUFN:NASDAQ). This bullish signal indicates that the stock price may rise from the close of $18.44 to the range of $20.90 - $21.50. The pattern formed over 17 days which is roughly the period of time in which the target price range may be achieved, according to standard principles of technical analysis.
Tells Me: The price has broken upward out of a consolidation period, suggesting a continuation of the prior uptrend.
A Symmetrical Continuation Triangle (Bullish) shows two converging trendlines as prices reach lower highs and higher lows. Volume diminishes as the price swings back and forth between an increasingly narrow range reflecting uncertainty in the market direction. Then well before the triangle reaches its apex, the price breaks out above the upper trendline with a noticeable increase in volume, confirming the pattern as a continuation of the prior uptrend.
Continuation Wedge (Bullish) | 40% move possibleUnited States Natural Gas Fund LP forms bullish "Continuation Wedge" chart pattern
"Continuation Wedge (Bullish)" chart pattern formed on United States Natural Gas Fund LP (UNG:NYSE). This bullish signal indicates that the stock price may rise from the close of $6.90 to the range of $9.20 - $9.70. The pattern formed over 18 days which is roughly the period of time in which the target price range may be achieved, according to standard principles of technical analysis.
Tells Me: After a temporary interruption, the prior uptrend is set to continue.
A Continuation Wedge (Bullish) represents a temporary interruption to an uptrend, taking the shape of two converging trendlines both slanted downward against the trend. During this time the bears attempt to win over the bulls, but in the end the bulls triumph as the break above the upper trendline signals a continuation of the prior uptrend.
EURUSD IDEA LONG/SHORTEurusd is currently on the bull side of the table,but as we see a hs pattern forming we could possibly see a reverse down,lets see how its going to play out this time,risk menagment,risk to reward are the things u should always keep in mind,and also how to enter and exit the trade,whats the way u entered the trade,its end of March so it could be volatility increasing for any pair,good luck to all traders!
Diamond Bottom | 27% move possibleDirexion Daily CSI China Internet Index Bull 2X Shares forms bullish "Diamond Bottom" chart pattern
"Diamond Bottom" chart pattern formed on Direxion Daily CSI China Internet Index Bull 2X Shares (CWEB:NYSE). This bullish signal indicates that the stock price may rise from the close of $50.19 to the range of $61.00 - $64.00. The pattern formed over 25 days which is roughly the period of time in which the target price range may be achieved, according to standard principles of technical analysis.
Tells Me: The price seems to have reached a bottom, showing signs of reversal as it has broken upward after a period of uncertainty or consolidation.
The Diamond Bottom pattern begins during a downtrend as prices create higher highs and lower lows in a broadening pattern. Then the trading range gradually narrows after the highs peak and the lows start trending upward. When the price breaks upward out of the diamonds boundary lines, it marks a significant reversal to a new uptrend.
Continuation Wedge (Bullish) | 30% move possibleInvesco Dynamic Oil & Gas Services ETF forms bullish "Continuation Wedge" chart pattern
"Continuation Wedge (Bullish)" chart pattern formed on Invesco Dynamic Oil & Gas Services ETF (PXJ:NYSE). This bullish signal indicates that the stock price may rise from the close of $4.85 to the range of $6.00 - $6.30. The pattern formed over 16 days which is roughly the period of time in which the target price range may be achieved, according to standard principles of technical analysis.
Tells Me: After a temporary interruption, the prior uptrend is set to continue.
A Continuation Wedge (Bullish) represents a temporary interruption to an uptrend, taking the shape of two converging trendlines both slanted downward against the trend. During this time the bears attempt to win over the bulls, but in the end the bulls triumph as the break above the upper trendline signals a continuation of the prior uptrend.
XAUUSD : Trading Gold with Harmonic butterfly patternOANDA:XAUUSD
Hi trader's .. i Hope you all are winning good profit from ,market and if not than no worry i am available for you help and assistance
As you can see perfect Harmonic pattern visible on chart
it's a bearish butterfly pattern , after completion of D leg market gives an 61.8 % retracement
Our target fully Hit , it's a 70 % accurate pattern , I have done 5 year's back testing on it
Market now on side way's breakout any side will tell the movement of gold
OIL SHORT RE-ENTERAfter being stopped out by a marginal higher high I've now re-entered a short with SL just above 74. Looking to profit from this one as I am confident that OIL will pull back.
Pennant (Bullish) | 27% move possibleDirexion Daily 20+ Year Treasury Bull 3X Shares (based on the NYSE 20 Year Plus Treasury forms bullish "Pennant" chart pattern
"Pennant (Bullish)" chart pattern formed on Direxion Daily 20+ Year Treasury Bull 3X Shares (based on the NYSE 20 Year Plus Treasury (TMF:NYSE). This bullish signal indicates that the stock price may rise from the close of $9.02 to the range of $11.00 - $11.50. The pattern formed over 9 days which is roughly the period of time in which the target price range may be achieved, according to standard principles of technical analysis.
Tells Me: The price seems to be resuming a sharp rally after taking a brief pause.
A bullish Pennant pattern occurs during a dynamic market rally, representing a brief period of indecision before running off again in the same direction. The pattern consists of two converging trend lines with diminishing volume, and is confirmed when the price breaks through the upper boundary to resume the advance.
Pennant (Bullish) | 10% move possible"Pennant (Bullish)" chart pattern formed on iShares 20 Year Treasury (TLT:NASDAQ). This bullish signal indicates that the stock price may rise from the close of $106.40 to the range of $115.00 - $117.00. The pattern formed over 8 days which is roughly the period of time in which the target price range may be achieved, according to standard principles of technical analysis.
Tells Me: The price seems to be resuming a sharp rally after taking a brief pause.
A bullish Pennant pattern occurs during a dynamic market rally, representing a brief period of indecision before running off again in the same direction. The pattern consists of two converging trend lines with diminishing volume, and is confirmed when the price breaks through the upper boundary to resume the advance.
gold analysis - 27 mar 2023salut salut, comment allez vous? ;)
my analysis is a follows...
- on higher timeframes such the daily and the weekly market has been in a range and has formed a double top on those time frames
- from last week thursday market respected a level of major resistance and was then bearish ever since
- the bearish move has broken out my upward trendline and market is currently at the support of the range
- what i will be doing now is waiting for a break of that support/neckline of double top then a restest for me to go short
- my stop will be above the breakout candlestick then take profit at the next major level of structure
and lastly if my edge happens i am taking the trade and then wait to see what happens
RISKOMETER Based on Your Trading Style ⚠️
Hey traders,
In this educational post, we will discuss the relation of risk to your trading style.
1️⃣ High Frequency Trading (HFT)
It is a complex algorithmic approach that is used to operate on second(s) time frames.
Such a style is considered to be the riskiest one.
With a very high frequency of order execution and sophisticated strategies, it requires a very high level of experience and proper software and hardware for successful operations.
2️⃣ Scalping
It is a manual trading style with operations on minutes time frames.
With the average holding period ranging from minutes to hours, scalping requires a high degree of attention and constant charts monitoring.
Being one of the most profitable trading styles for retail traders, scalping involves an extremely high risk and mental load.
3️⃣ Day trading
The form of speculation in which the traders attempt to make profits within a single trading day.
Occasionally, however, day traders may hold their positions overnight.
Day trading is considered to be slower than scalping, with the trade execution on hourly time frames.
Slower pace drastically reduces risks also limiting the potential gains.
4️⃣ Swing trading
It is a style of trading that is aimed to make profits on swing moves, with an average holding period ranging from days to weeks.
4H time frame is the lowest time frame where swing traders usually operate, and a daily time frame is usually the highest one.
The operations on higher time frame dramatically reduces the noise and degree of manipulations, making that style of trading relatively safe.
5️⃣Investing (Position Trading)
Trading / investing style aiming to make long-term profits.
The average holding time of a position trader may expand to years.
In comparison to other trading styles, investing generally produces the smallest gain. That is, however, compensated by extremely low risks.
Correct understanding of relations between trading styles and potential risks is crucially important for a selection of an appropriate style for you.
Shorter is the holding period and operational time frames, higher is the risk, but higher are the potential gains.
You should pick the style that fits your risk-tolerance and expectation.
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Building Your First Trading Plan | Step By Step Guide
📖What is a trading plan?
A trading plan is a comprehensive decision-making tool for your trading activity. It helps you decide what, when and how much to trade. A trading plan should be your own, personal plan – you could use someone else’s plan as an outline but remember that someone else’s attitude towards risk and available capital could be vastly different to yours.
📚Why do you need a trading plan?
You need a trading plan because it can help you make logical trading decisions and define the parameters of your ideal trade. A good trading plan will help you to avoid making emotional decisions in the heat of the moment.
✳️TRADING PLAN CREATION STEPS:
1️⃣Outline your motivation
Figuring out your motivation for trading and the time you’re willing to commit is an important step in creating your trading plan. Ask yourself why you want to become a trader and then write down what you want to achieve from trading.
2️⃣Decide how much time you can commit to trading
Work out how much time you can commit to your trading activities. Can you trade while you’re at work, or do you have to manage your trades early in the mornings or late at night?
If you want to make a lot of trades a day, you’ll need more time. If you’re going long on assets that will mature over a significant period of time – and plan to use stops, limits and alerts to manage your risk – you may not need many hours a day.
It's also important to spend enough time preparing yourself for trading, which includes education, practising your strategies and analysing the markets.
3️⃣Define your goals
Any trading goal shouldn’t just be a simple statement, it should be specific, measurable, attainable, relevant and time-bound (SMART). For example, ‘I want to increase the value of my entire portfolio by 15% in the next 12 months’. This goal is SMART because the figures are specific, you can measure your success, it’s attainable, it’s about trading, and there’s a time-frame attached to it.You should also decide what type of trader you are. Your trading style should be based on your personality, your attitude to risk, as well as the amount of time you’re willing to commit to trading.
4️⃣Choose a risk-reward ratio
Before you start trading, work out how much risk you're prepared to take on – both for individual trades and your trading strategy as a whole. Deciding your risk limit is very important. Market prices are always changing and even the safest financial instruments carry some degree of risk. Some new traders prefer to take on a lower risk to test the waters, while some take on more risk in the hopes of making larger profits – this is completely up to you.
It is possible to lose more times than you win and still be consistently profitable. It's all down to risk vs reward.
5️⃣Decide how much capital you have for trading
Look at how much money you can afford to dedicate to trading. You should never risk more than you can afford to lose. Trading involves plenty of risk, and you could end up losing all your trading capital (or more, if you are a professional trader).
Do the maths before you start and make sure you can afford the maximum potential loss on every trade. If you don't have enough trading capital to start right now, practise trading on a demo account until you do.
6️⃣Start a trading diary
For a trading plan to work it needs to be backed up by a trading diary. You should use your trading diary to document your trades as this can help you find out what’s working and what isn’t.You don’t only have to include the technical details, such as the entry and exit points of the trade, but also the rationale behind your trading decisions and emotions. If you deviate from your plan, write down why you did it and what the outcome was. The more detail in your diary, the better.
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What do you want to learn in the next post?
nas100 analysis - 24 mar 2023- on the weekly we are bullish due to market breaking out of major resistance earlier this year around jan 23rd
- and then the market went on to form a new higher low point around the previous lower high point which was broken
- now we are currently at the high high point and market showed signs of respecting that level during the last week but has held it's bullish momentum this week and i see it breaking out the higher high
- down onto the daily market has been in a range for 3 days but today's daily shows some buying pressure
- currently waiting for the range on the H1 to breakout to the upside to go long, i am leaning more towards being bullish also because on lower timeframes market is forming HH'S and HL's
- if it breaks to the downside i'll revisit my analysis and make a decision from there
- tp and sl are as shown on the chart
God bless :)
