LOW RISK HIGH REWARD - TEXT VERSION

REWARD TO RISK magnitude relation

In this lesson, we'll target the way to use support and resistance levels as the way to enhance traders’ profits. in step with their mercantilism vogue (and in fact supported the time-frame that they use), each bargainer ought to opt for a risk/reward magnitude relation that he feels snug with. These reward-to-risk ratios ar the key to finding and corporal punishment high yield, low risk trades, no matter whether or not a bargainer is mistreatment daily, weekly or monthly graphs or charts, or the other kind of indicator. continually bear in mind that each trade carries a particular level of risk and mercantilism success is all concerning creating the maximum amount as you'll after you ar right and losing as very little as attainable after you ar wrong.

There ar many completely different trade setups that provide profit. though they use completely different indicators to research the value movements, they need 2 things in common: 

High Reward and Low Risk:

Knowing the number of risk on every trade is a technique to limit your losses and to guard your mercantilism account. It additionally implies that you recognize your profit target. A disciplined bargainer can take a mean system associated create cash with it however an capricious bargainer can take a superb system and wreck it. Since losing is associate inevitable a part of this game, a bargainer ought to learn the way to attenuate the chance and increase the reward.

Low Risk: if you decide on your entry points close to support / resistance, you'll be reducing your risk as a result of you'll shut your position with atiny low loss if that support / resistance is broken. 

High Reward: maybe exits ar a lot of vital than entries as a result of excellent entries ar virtually not possible. after you commit to open an edge, you must check that that costs have enough space to maneuver. within the globe, reward-to-risk ratios are not set in stone. they have to be adjusted reckoning on the time-frame and market atmosphere. However, some traders believe that the best ought to be 3:1. which means you're willing to lose ten pips so as to achieve thirty pips; or one hundred pips for three hundred pips.

The reason we have a tendency to try and trade solely these high reward and low risk magnitude relation things is that we are able to be profitable while not having a high share of winning trades.

The chart below shows a perfect setup wherever the reward-to risk magnitude relation is 3:1. you will not acknowledge all of the terms or perceive why we've got sturdy support and resistance. For now, simply apprehend that the entry is at sturdy support, and also the exit purpose is at sturdy resistance.