News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bullish
Wall Street
Bearish
Gold
Bearish
GBP/USD
Bearish
USD/JPY
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • Use this technical analysis pattern recognition skills test to sharpen your knowledge: https://t.co/Qgz89PTxnu https://t.co/HUYJzEkYiT
  • #Gold prices put in a major breakout last month and, so far, buyers have held the line. But a really big Fed meeting is on the calendar for this week. Can Gold bulls hold? Get your market update from @JStanleyFX here: https://t.co/NGRTSfceOW https://t.co/QkSUORIQE2
  • Struggling to define key levels? Floor-Trader Pivots assist traders in identifying areas in a chart where price is likely to approach and can be used to set appropriate targets, while effectively managing risk. Learn how to use this indicator here: https://t.co/Ye4m1FMKUW https://t.co/PHK2sqB1jV
  • Top event risk for more than just the Dow and Dollar this week is the Wednesday #FOMC rate decision. What the markets expect sets the tone for how the event impacts price action. My run down of the week and Fed decision: https://www.dailyfx.com/forex/video/daily_news_report/2021/06/12/Dollar-and-SP-500-Breaks-Must-Abide-the-FOMC-Decision-This-Week.html https://t.co/Huvth4f706
  • What suits your style of trading stocks or commodities? Find out what are the differences in these two markets here: https://t.co/BnA07cMV0s https://t.co/AkE7bFRWAt
  • $GBPUSD continues to trade in ranges as volatility dwindles. UK data to play second fiddle to FOMC. Get your market update from @JMcQueenFX here: https://t.co/T0Eg4KaENB https://t.co/GMmZa5L0Il
  • Get your snapshot update of the of market open and closing times for each major trading hub around the globe here: https://t.co/BgZLFljIhZ https://t.co/wlGgQrcK3X
  • What's the difference between leading and lagging indicators? Find out from here: https://t.co/vGx8HCagF5 https://t.co/qnQ8Cx0DKv
  • Dealing with the fear of missing out – or FOMO – is a highly valuable skill for traders. Not only can FOMO have a negative emotional impact, it can cloud judgment and overshadow logic. Learn how you can control FOMO in your trading here: https://t.co/lgDf5cVYOn https://t.co/RJLpBgS43V
  • Currency exchange rates are impacted by several factors. Are different world leaders a contributing factor? Find out here: https://t.co/4jsORznRTE https://t.co/6GrWzkOouM
Would You Like to Increase Your Chances of Being a Successful Trader?

Would You Like to Increase Your Chances of Being a Successful Trader?

Richard Krivo, Trading Instructor

Whenever the concept of Money Management comes up, the topic of the Risk Reward Ratio must be covered as well.

In a nutshell, the Risk Reward Ratio (RRR) is the size of the limit relative to the size of the stop. For example, if the stop is 75 pips below the entry in a long position, for a 1:2 RRR the limit would need to be 150 pips above the entry…twice the amount of the stop.

To set a risk reward ratio, a limit or profit targetmust be present so that the Risk Reward Ratio can be determined in the first place. Both the stop and the limit must be present for the ratio to exist.

By trading with at least a 1:2 RRR in place, a trader need only be right in 40% of their trades to be profitable. This works out since they will gaining twice as much on their winning trades as they will be losing on their losing trades.

For example, let’s say a trader takes 10 higher probability trades each with a 50 pip stop and a 100 pip limit. If they lose 6 of those trades they will have lost 300 pips. (6 x 50 pips = 300 pips) On the 4 trades that they win they will have gained 400 pips. (4 x 100 pips = 400 pips) The result is a net gain of 100 pips.

Another reason for setting a RRR has to do with emotions

Without a limit in place, should the trade surpass the 1:2 ratio level, a little bit of greed (or a lot of it) may kick in and the trader may decide to let the trade run. (True…this may ultimately work in favor of the trader.)However, by not having a predetermined exit strategy, the trade may retrace away from thepointat which the limit would have been set initiallythereby cutting into or completely negating any potential profits.

Here are two things that I do regarding a Risk Reward Ratio...

1) When/if the trade reaches half the distance to the limit (profit target) I have set, I move the stop to breakeven thereby eliminating risk on the trade. If the pair retraces and hits the stop, I will be stopped out at breakeven…the point at which the trade was entered. While the trade will not show a gain, it will not show a loss either.

2) I will usually trade multiple lots as this affords me another option. I can do what I suggested above and move my stop to breakeven half way to my profit target. In addition, by trading multiple lots, I can close half the positions that I am trading at that point as well to lock in profit.

On the remaining open positions I alreadyhave the stop at breakeven. I then willmanually trail the stop at a very respectable distance should the trade continue to progress in the intended direction. As long as the trade continues in my direction, I can continue to trail my stop and capture additional profit.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES