Risk/Reward drawing tool

Table of Contents

Risk/Reward tool helps you to calculate the position size based on the maximum risk you are willing to take opening the position, as well as estimate the Profit & Loss (PnL) and calculate the value of your account balance once the profit-target or stop-loss will be reached.

How to use it #

1) Start inserting the tool:

  • by pressing Risk/Reward button on drawings toolbar
  • or by selecting from Workspace window the Insert menu > Drawing > Risk/Reward

2) Draw Position Entry, Profit-Target and Stop-Loss levels on chart

3) Calculate position size based on the maximum risk you are willing to take

If you already know the position size then set the following properties in drawing tool configuration:

Calculation Method: Fixed

Value: enter the Position Size (quantity)

If you want to automatically calculate the position size based on the maximum risk you are willing to take, set the following properties in drawing tool configuration:

Account Size: set the account balance (total cash amount of your account)

Calculation Method: Automatic

Risk: The sum you are willing to lose in the position can be calculated in two ways:

  • Cash: set the maximum loss cash amount
  • Percentage: set the percentage of Account-Size that you are willing to lose

Further information #

Let’s see in detail all information available and how it is calculated:

1 = Entry, Target, Stop Price Levels

2 = Profit or Loss once the profit-target or stop-loss levels are reached

3 = Account balance once the profit-target or stop-loss levels are reached

LONG POSITION
Account Balance on profit-target levelAmount = AccountSize + (ProfitLevel – EntryPrice) * PointValue * Qty
Account Balance on stop-loss levelAmount = AccountSize – (EntryPrice – StopLevel) * PointValue * Qty
SHORT POSITION
Account Balance on profit-target levelAmount = AccountSize + (EntryPrice – ProfitLevel) * PointValue * Qty
Account Balance on stop-loss levelAccountSize – (StopLevel – EntryPrice) * PointValue * Qty

4 = Current Position Profit & Loss (PnL)

5 = Position Size (quantity)

LONG POSITION
Qty = Risk / ((EntryPrice – StopPrice) * PointValue)
SHORT POSITION
Qty = Risk / ((StopPrice – EntryPrice) * PointValue)

6 = Risk/Reward Ratio = ProfitOnTarget / LossOnStop

Videos #