{"id":9418,"date":"2011-01-26T09:57:37","date_gmt":"2011-01-26T14:57:37","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=9418"},"modified":"2021-05-06T15:04:00","modified_gmt":"2021-05-06T19:04:00","slug":"traders-ask-how-do-you-determine-your-riskreward","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-do-you-determine-your-riskreward","title":{"rendered":"Traders Ask: How Do You Determine Your Risk\/Reward?"},"content":{"rendered":"

Hi Mike,<\/p>\n

Just finishing your book\u00a0One Good Trade<\/span> with this take away.\u00a0 I am determined to master the skill of ‘reading the tape’, believing that to be the golden key to my future success as an intraday trader.\u00a0 Thanks for infusing me with new motivation.\u00a0 One question. \u00a0I’m a little confused about how to actually measure the risk\/ reward going into a trade.\u00a0 I know the formula is a ratio of 1\/5, but how exactly do you measure those numbers.<\/p><\/blockquote>\n

Bella Responds<\/strong><\/p>\n

It takes experience and a feel for each set up. \u00a0You estimate where you will get out if you are wrong. \u00a0You estimate\u00a0where you will exit if you are correct. \u00a0And then you get a ratio. \u00a0For developing traders we ask them to think about ratios of a downside of 1 and an upside of 5. \u00a0So if your estimated loss is 10c then you must have an expected upside of 50c. \u00a0If not then this is not an excellent risk\/reward for developing traders. \u00a0As you progress you might look for risk\/reward ratios of 1×3. \u00a0There are many traders very content mastering setups of 1×2 risk\/reward. \u00a0But at the start it is best to focus on controlling your risk and the more opportunistic, easier trades. \u00a0You build your base from here and then expand.<\/p>\n

There will be times when you poorly estimate<\/a> your risk reward. \u00a0What is important is to calculate your risk\/reward before each trade. \u00a0And work to make sure you are getting better at such estimations and are disciplined with your exits.<\/p>\n

Mike Bellafiore<\/p>\n

Author, One Good Trade<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Hi Mike, Just finishing your book\u00a0One Good Trade with this take away.\u00a0 I am determined to master the skill of ‘reading the tape’, believing that to be the golden key to my future success as an intraday trader.\u00a0 Thanks for infusing me with new motivation.\u00a0 One question. \u00a0I’m a little confused about how to actually measure the risk\/ reward going … Read More<\/a><\/p>\n","protected":false},"author":144,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10,908],"tags":[4674,18,1193,653,1354,1349],"class_list":["post-9418","post","type-post","status-publish","format-standard","hentry","category-mike-bellafiore-bellas-blogs","category-traders-ask","tag-one-good-trade","tag-smb-capital","tag-trader-education","tag-trader-training","tag-trading-coach","tag-trading-mentor","no-post-thumbnail"],"yoast_head":"\nTraders Ask: How Do You Determine Your Risk\/Reward? | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/traders-ask-how-do-you-determine-your-riskreward\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Traders Ask: How Do You Determine Your Risk\/Reward? | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Hi Mike, Just finishing your book\u00a0One Good Trade with this take away.\u00a0 I am determined to master the skill of ‘reading the tape’, believing that to be the golden key to my future success as an intraday trader.\u00a0 Thanks for infusing me with new motivation.\u00a0 One question. \u00a0I’m a little confused about how to actually measure the risk\/ reward going ... 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