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Showing results for tags 'risk vs reward'.
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Getting the proper entry is a major part of becoming a successful trader. Big loss's lead to emotional trading, which in term leads to more loss's. With the proper entry that offers you a good risk vs reward ratio you can minimize your risk while allowing the best possible reward.You should never lose more than 2% of your total capital on any single trade.Following these two simple rules will allow you to define your risk as a trader and allow you to remove the emotional stress that trading can force on to you. Every chart has to be read differently and I don't think there is just one strategy that works for every stock. But I base my entries off good risk to reward. 1:3 or higher. So when I find a chart that offers me at least 1:3 risk to reward ratio. I make sure that my stop can be placed low enough that the stock has room to move, so I don't end up stopping out early. But not risking more that 2% total capital. Example would be $COWN My Idea on this stock was to take advantage of a major sell off or large dip. There was strong support in the 5.45 area as well as the 50day sma that was holding up. The yellow circle represents the day I started my swing at 5.50. The Red circle represent our previous low of 5.39 an area we could place our stop to define our risk. The green circle is our target at 5.95, our previous high as well a strong resistance area. so in term we are risking .11cents with a possible .45cent reward to giving us a 1:4 risk:reward ratio. Once my risk is defined I figure out how large of a position size I can do based off only risking 2% of my total capital. If a chart can not offer me these two things together then for me it is not a good entry point.