1. Planning Your Trade Understanding Reward/Risk Ratios
By: Stacie Shapiro

2. Planning Your Trade Do you know what kind of trader you are?
Do you have a trade plan?
How do you decide whether or not you are going to enter a trade
Do you get into a trade and then figure out your stop and where you plan to take profits
Do you trade what you think or what the chart tells you?
Earnings reports: RVBD, FTNT
Loving the company: TZOO, FFIV
Chinese stocks: RINO, YUII, SINO
Do you know exactly what you are willing to risk on every trade and what you expect to make
Some momentum scalp traders don’t use reward:risk

3. What is Reward/Risk
A calculation by how much you are willing to risk on the trade in order to make your target amount
Many ways to base this calculation
Measured moves based on chart patterns
Moving averages
Trend lines
Gap windows, etc….
What is the minimum reward:risk you are willing to accept
Does it make sense to do bracket scalps – risk 10 cents to make 10 cents?
Oftentimes there are several resistance levels so you have to have a starting reference point. For example jumping a trade and entering right under a trendline or moving average

4. Calculation Entry price 100 Expected Target 105 Stop loss used 2 pts
Reward: = 5 points
Risk: points
Reward /Risk: 5 divided by 2 or 2.5

5. Enter: 44
Stop: 47.5
Target: 37
Reward: 10 points
Risk: 2.5
Reward/Risk 4:1

6. Enter: 15.85
Stop: (right below 50 ma)
Target: (height of triangle .9 + breakout point)
Reward: .9
Risk: .35
Reward/Risk: 2.5
Note can also add above the for continuation

7. GAP FILL Enter: 117 Stop: 116.75 Target 1: 119 Reward: 2 points
Risk: .25
Reward to Risk ratio: 8:1

8. Enter: 39
Stop: 37
Target: 45.2 (height of wedge is 6.2 points add to breakout of 39)
Reward: 6.2
Risk: 2
Reward/Risk: 3

9. Day Trade Have to know levels on all time frames, daily, 60 , 30 etc…
On the daily there is resistance at the 20 moving average (154.3) and 2 trendlines

10. Thursday the stock opened above the 20 ma daily
It had to clear the resistance of previous day to be a buy at 158.5
I set my stop at (below the body of the candle that I entered on)
First resistance is from my daily
Expected reward: about 2 points
Risk about one point so 2: 1
This trade actually went a lot higher so scaled in and out- but expectation can only really be first level of resistance as there is no measured pattern