Here at the TradingPub we are determined to share some great trading education and give you, our devoted follower, the opportunity to potentially benefit from some of those strategies.
One of the great features of the strategy we are about to share is the risk to reward ratio and how it is used for determining potential trades.
For those who are not familiar with the Risk to Reward Ratio (R/R), in the Forex market, it is how many pips you target on a given trade. For example, if you target 100 pips gain and your stop loss is set at 100 pips your R/R ratio is 1:1, those positions are equal distance from your entry, as shown in the image below.
This strategy will use pending orders while still targeting the same risk and increase the reward from 1:1 R/R to 1:2, or even 1:3 R/R. If every win was worth twice or three times more, without increasing your risk to achieve, it can make a great difference in your trading account over time.
A trader who takes 1% risk to earn 1% return will naturally win about half of his/her trades, making that trader a Break-Even one. However, with the Pending Order Strategy you can keep the integrity of each trade by placing the same target and stop loss, but if you earn 2-3% for every percent you risk, you will be FAR from a Break-Even trader.
Anybody can figure this much out, however, the real question is how can you make this happen?! Implementing Pending Orders is one way. The picture below is an example setup of the Pending Order Strategy.
The difference maker is in knowing that about 70% of breakout or trend continuation moves come back to retest a recent level before continuing in the breakout direction. So, if you are trading a bullish trend and you get a breakout in that direction 70% of those moves will come back and test that critical level before they continue. Knowing this can change the way you trade. You can enter the same trade after seeing the confirmation occur, but at a better price that leads to exponential results when it comes to your Risk to Reward ratio.
Improving the Risk to Reward ratio by even a tiny amount has a huge effect on any strategy. The problem, however, is making sure you calculate the entry properly, as this can truly affect your gains. This requires you to understand exactly where your entry needs to be to achieve the desired Risk to Reward ratio. Winner's Edge Trading has developed a tool that can help you with the precision required to execute a Pending Order trade greatly. You can downloads it here using the link below.
Watch this video to see more details about the Epic Tool and how it can really help you execute the Pending Order Strategy. The video breaks down the simple steps used to trade this strategy effectively in just a few minutes.