Hi guys,
Another newbie question.
I read about risk:reward ratios everywhere but I can't figure out how to actually compute one for a given trade.
For example, say I want to enter a trade on the EURUSD currency pair with a risk:reward ratio of 1:3 (or 3:1 - which direction does it go? - either way, I mean higher reward than risk). I have an account with $1,000 margin available (brand new account - no other trades of any kind made yet - just to keep everything nice and simple).
I want to risk 1 micro lot. So I enter the market at 1.4740 with an $100 (1 micro lot) buy and the expectation that the market will rise.
How do I compute the risk:reward ratio on this trade?
Am I missing numbers need for the computation? What other numbers do I need to complete the computation?
Once I can figure out the full equation, I think I'll have a much better understanding of how this works.
Much thanks!
Another newbie question.
I read about risk:reward ratios everywhere but I can't figure out how to actually compute one for a given trade.
For example, say I want to enter a trade on the EURUSD currency pair with a risk:reward ratio of 1:3 (or 3:1 - which direction does it go? - either way, I mean higher reward than risk). I have an account with $1,000 margin available (brand new account - no other trades of any kind made yet - just to keep everything nice and simple).
I want to risk 1 micro lot. So I enter the market at 1.4740 with an $100 (1 micro lot) buy and the expectation that the market will rise.
How do I compute the risk:reward ratio on this trade?
Am I missing numbers need for the computation? What other numbers do I need to complete the computation?
Once I can figure out the full equation, I think I'll have a much better understanding of how this works.
Much thanks!
Best,
- Iggy