Now when you know what stop loss and target point orders are, it is time to let you know how to using these two orders predefine how much your risk per trade is going to be as well as a potential reward.
If you want to risk dollar for dollar, the distance between your entry price and target point price has to be equal to the difference between entry price and stop loss. The risk is equal to reward, and we usually mark it 1:1.
If you want to risk a dollar for $2, the distance between an entry point and a target point has to be two times of a distance between an entry point and a stop loss point. Then the risk-reward will be 1:2. And so on…
Now as you know how to calculate risk-reward, make sure to understand one important thing (if you still do not know how to calculate it, check our bot that calculates it automatically for you). Make sure your risk-reward is reasonable. Risking $2 for a dollar doesn’t make a sense but also risking a dollar for $10. The risk-reward we suggest is between risking a dollar for $2 up to $4.
After you’ve learned about trade management, it is time for you to dive deeper and start reading the course about charting and applying the knowledge you’ve acquired in this course.
Milos is an independent trader, with a background in journalism and publishing. Nomadic by nature, he’s lived in four different countries this decade. He’s fascinated by Blockchain technologies’ potential to reshape all aspects of our lives. Milos got into Bitcoin while completing his degree and hasn’t looked back since, writing about anything crypto-related. He is the co-founder of the Cryptoaims and he has a strong passion to educate people about this revolutionary technology.