fxhunter98
New Member
Sorry for the provocative looking title, but most of what I've been reading on these forums about risk / reward seems to treat their calculation as simply the difference between opening price and SL/TP ... albeit SL and TP prices derived from (perceived) S/R or trend or phases of the moon.
However, as both the SL and TP are subjective figures drawn by the trader himself, they are irrelevant till one of them is activated. They are simply dots on a screen and have no direct influence on risk (except to the extent that SL may attract stop hunters in which situation having an SL may actually add to the risk, but that's a different story).
In the meanwhile, the real risk is dependent on various technical, fundamental and market sentiment influences.
I'm sure that trading based on those calculations works for some traders, but that has little to do with real risk/potential reward of the trade and more to do with their judgment (or their backtested system) deciding where to place SL and TP in a manner that has worked statistically in the past.
How do YOU calculate potential real risk and potential reward prior to placing a trade?
However, as both the SL and TP are subjective figures drawn by the trader himself, they are irrelevant till one of them is activated. They are simply dots on a screen and have no direct influence on risk (except to the extent that SL may attract stop hunters in which situation having an SL may actually add to the risk, but that's a different story).
In the meanwhile, the real risk is dependent on various technical, fundamental and market sentiment influences.
I'm sure that trading based on those calculations works for some traders, but that has little to do with real risk/potential reward of the trade and more to do with their judgment (or their backtested system) deciding where to place SL and TP in a manner that has worked statistically in the past.
How do YOU calculate potential real risk and potential reward prior to placing a trade?
