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Old 01-20-2009, 06:13 AM   #10 (permalink)
Cristian
 
Join Date: Jul 2008
Location: Romania
Posts: 49

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risk reward ratio


I do agree with this stop strategy, but one day i red about how to place a stop order while you are trading a head & shoulders, and there writes that if the formation is in a bull market, it's a continuation pattern, and when it's in a bear market the head&shoulders it's a continuation pattern as well, like flags pannents and ascending wedges.Now, about placing the stop, the author of the book wrotes that is better to place your stop above the HEAD, because he explains that the nature of funds manager and banks as well, they deliberate raise the price above the right shoulders in purpose to stop you and taking losses; and I don't understand why a risk reward ratio 1:3. I use a strategy to place a market order with stop and limit as well, but I use to place the stop at 3 ATRs away from the market price. So, if I multiply the pips in order to give my reward ratio as 1:3 or 3:1 don't matter. If I risk 3ATRs away, that means i must take profit on 9ATRs away in my favour. That being said, if I used to wait a month in an open position, whit this money management strategy, I should wait a month and a half in the hypothesis that the markets rally or falls in a month 600 pips, and 1ATR is 150 pips. Maybe is not the proper place to post this comment, but I hope you don't mind it.


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