1. Risk Management www.goldenzonetrading.com Risk vs Reward + Tight Trade Mgmt.

2. Disclaimer  Golden Zone Trading has no financial interest in the outcome of any trades mentioned herein. There is a substantial risk of loss when trading securities. You need to determine your own suitability to trade them. There may be tax consequences for short term profits or losses on trades. Consult your tax professional or advisor for details on these if applicable. Neither Golden Zone Trading, nor its principles or employees are licensed brokers or advisors. Becoming a subscriber and/or trading any of these lessons or strategies presumes you have fully read and understood the risk involved in trading as set forth below:  Golden Zone Trading offers services and products for educational purposes only. The generic market recommendations provided by us are based solely on the judgment of our personnel and should be considered as such. You acknowledge that you enter into any transactions relying on your own judgment. Any market recommendations provided by us are generic only and may or may not be consistent with the market positions or intentions of our firm and/or our affiliates. Any opinions, news, research, analysis, prices, or other information contained on our website or by presentation of our material is provided as general market commentary, and do not constitute investment advice.  CFTC RULE 4.41 – Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

3. Risk & Reward Overview What is Risk?  The amount your willing to lose in a trade  The distance between your entry & stop loss.  The cost of doing business (commissions)  Emotional trading/Chasing trades/Not following your rules  News volatility/session opens & closes What is Reward?  The profit potential on each trade  Setting appropriate targets based on what the market allows  Understanding risk/reward (0.5:1/1:1/1.5:1/2:1/2.5:1/3:1) profit objectives  Understanding statistical profit objectives (backtesting)  Following rules & participating in risk free trades We Will Trade For:  Small Wins, Large wins, Small losses & Break/Evens  NEVER LARGE LOSSES!

4. The Risk/Reward Trade-Off Option 1:  Less risk than reward (Ex: $1.50 or $2.00 reward to $1.00 risk)  We have to be right less  We need larger winning trades to make money.  Win less but have larger profit targets Option 2:  Less reward than risk (Ex: $1.00 or $0.75 reward to $1.00 risk)  We will have smaller gains with each trade  The possibility of trades working out increases with closer targets  Requires a (higher winning %) to profit consistently.  Win more but have shorter profit targets

5. Option 1: Reward > Risk

6. Option 2: Risk >/= Reward

7. Advanced Risk/Reward – Tight Trade Mgmt.  Planning trades around Risk/Reward involves: Trade selection/Proper planning Tight risk management Increased opportunity Risk tolerance Skill set/practice Market temperament  Opportunity will exist when (Risk > Reward) or when (Risk < Reward).  You will need to set a (R/R) plan that suits you! Example: If your (R/R) plan is ($1.00/Risk to $1.50/Reward) minimum, this means you will always strive for (Reward > Risk). Advanced participation: If you identify a trade setup that doesn’t meet your (R/R) plan, you can still participate by using tight trade management. This allows you to protect your downside risk, while allowing for an opportunity to try and reach your (R/R) plan.

8. Advanced Risk/Reward – Tight Trade Mgmt. Ex: #1

10. Advanced Risk/Reward – Tight Trade Mgmt. Ex: #2