Recently we wrote a report entitled "Are you using Risk Management?" In that report we touched on a number of principals regarding risk management that we believe every trader should apply to their trading. In this segment, we will address the principal of Risk-to-Reward Ratio, along with common misconceptions regarding this concept.
Classic Definition of Risk-to-Reward Ratio
The risk-to-reward ratio is simply a calculation of how much financial risk is involved in a trade versus how much prof...
What is Risk Management?
Risk Management is the skill and willingness to manage both the potential loss and gain during a trade. While most traders are aware of the concept of risk management, in practice they often implement it as the least important aspect of their trading. There is nothing wrong with trading to win. But in real life, it is the management of potential losses that separates successful traders from the rest.
Your Personal Risk Tolerance
What is the maximum amount you risk on ...