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)