MarvinKops posted: How to effectively calculate Risk and Reward. formula to use as well as tips to make it easy to understand.
It is quite easy. Lets say you want to risk 1% per each trade. So you need to calculate value of 1 pip and set your TP and SL accordingly. P.S. if there is a gap over weekend your SL,TP wont be executed. So the calculation. My favourite pair EUR USD. Account balance $100,000. 1% is $1,000. The simplest example: Buy 1 lot of eur usd at the rate 1.18000. It does actually mean you spent $118,000 USD to buy 100,000 EUR. So if the rate move to 1.19000 then value of position is $119,000 USD. You made $1,000 profit (minus spread, commison and sllipage) So if the rate move to 1.17000 then value of position is $117,000 USD. You made $1,000 loss (plus spread, commison and sllipage) So your SL and TP are 1.17000 and 1.19000 = 1,000 pips (pipetes actually)
HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors.
Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance.
You could lose some or all of your initial investment. Do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions.
Any data and information is provided 'as is' solely for informational purposes, and is not intended for trading purposes or advice.
Past performance is not indicative of future results.