Do you have a Reward to Risk ratioIn the world of trading, do you know what a Rw/Rs (Reward to Risk) ratio is? if you dont this article will be beyond your understanding. I suggest you read up on Reward to Risk ratio & come back to read this. If you do know what a Rw/Rs ratio & assume most of you do, we can continue our merry trade discussion ;D
My Rw/Rs ratio for Swing trades that i take on a Weekly (W) chart is factor of 4 to 6, am happy to see more. with my Day trading strategy; am a little more aggressive & will settle for a Rw/Rs factor of 3-4 to take on a day trade.
Once a while, a trade opportunity arises that offer such a large room for Reward to run, as in this (W) chart of WMT WalMart Corp. if the trades goes my way, look at this room for profit to run, with no resistance of supplyzone in sight this can go up.....sweet mama, she got my attention.
First; (Disclaimer) I will never take a trade solely based on a sweet Rw/Rs the odds are not in my favour. Back to the trade. So i have a sweet Rw/Rs ratio what else is going on? Price is crashing into a DZ from the (M) & this DZ happens to be the HL of the month (M) uptrend. This is good, The week (W) price chart is into the long-term chart DZ (Demand zone). This qualifies only if the (M) is still in a technically defined in uptrend. This is a Classic trade set-up I love.
Like a Snipper I set my LNG (long) entry at 117 level slightly above the lower band of the DZ, my entry was so low that my risk was less than a dollar before my STP triggers. I took the Long position, the market rallied & so did WMT, & I closed 1/2 my position once price reached 128, I took a good 10 Rw (Reward) pressure if off. already the trade made its money. & I let the 1/2 of the position run. Lets see how it goes when the market is open on Monday. This was a swing trade using the (W) chart to identify the setup. Long-term would be the (M) chart & I used the (D) daily chart to enter & set my STP.
