{"id":1724,"date":"2022-06-01T09:27:00","date_gmt":"2022-06-01T09:27:00","guid":{"rendered":"https:\/\/www.overcharts.com\/en\/helpcenter\/?post_type=docs&p=1724"},"modified":"2022-06-10T12:41:25","modified_gmt":"2022-06-10T12:41:25","password":"","slug":"risk-reward-drawing-tool","status":"publish","type":"docs","link":"https:\/\/www.overcharts.com\/en\/helpcenter\/docs\/risk-reward-drawing-tool\/","title":{"rendered":"Risk\/Reward drawing tool"},"content":{"rendered":"\n

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.<\/p>\n\n\n\n

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How to use it<\/strong><\/h3>\n\n\n\n

1<\/strong>) Start inserting the tool:<\/p>\n\n\n\n

  • by pressing Risk\/Reward<\/em> button on drawings toolbar<\/li>
  • or by selecting from Workspace window the Insert<\/em> menu > Drawing<\/em> > Risk\/Reward<\/em><\/li><\/ul>\n\n\n\n
    \"\"<\/figure>\n\n\n\n
    <\/div>\n\n\n\n

    2<\/strong>) Draw Position Entry, Profit-Target and Stop-Loss levels on chart<\/p>\n\n\n\n

    \"\"<\/figure>\n\n\n\n
    <\/div>\n\n\n\n

    3<\/strong>) Calculate position size based on the maximum risk you are willing to take<\/p>\n\n\n\n

    If you already know the position size<\/strong> then set the following properties in drawing tool configuration:<\/p>\n\n\n\n

    Calculation Method<\/strong>: Fixed<\/p>\n\n\n\n

    Value<\/strong>: enter the Position Size (quantity)<\/p>\n\n\n\n

    \"\"<\/figure>\n\n\n\n
    <\/div>\n\n\n\n

    If you want to automatically calculate<\/strong> the position size<\/strong> based on the maximum risk you are willing to take, set the following properties in drawing tool configuration:<\/p>\n\n\n\n

    Account Size<\/strong>: set the account balance (total cash amount of your account)<\/p>\n\n\n\n

    Calculation Method<\/strong>: Automatic<\/p>\n\n\n\n

    Risk<\/strong>: The sum you are willing to lose in the position can be calculated in two ways:<\/p>\n\n\n\n

    • Cash<\/strong>: set the maximum loss cash amount<\/li>
    • Percentage<\/strong>: set the percentage of Account-Size that you are willing to lose<\/li><\/ul>\n\n\n\n
      \"\"<\/figure>\n\n\n\n
      <\/div>\n\n\n\n
      \"\"<\/figure>\n\n\n\n
      <\/div>\n\n\n\n

      Further information<\/strong><\/h3>\n\n\n\n

      Let\u2019s see in detail all information available and how it is calculated:<\/p>\n\n\n\n

      \"\"<\/figure>\n\n\n\n
      <\/div>\n\n\n\n

      1 = Entry, Target, Stop Price Levels<\/p>\n\n\n\n

      2 = Profit or Loss once the profit-target or stop-loss levels are reached<\/p>\n\n\n\n

      3 = Account balance once the profit-target or stop-loss levels are reached<\/p>\n\n\n\n

      LONG POSITION<\/strong><\/th><\/th><\/tr><\/thead>
      Account Balance on profit-target level<\/td>Amount = AccountSize + (ProfitLevel \u2013 EntryPrice) * PointValue * Qty<\/td><\/tr>
      Account Balance on stop-loss level<\/td>Amount = AccountSize \u2013 (EntryPrice \u2013 StopLevel) * PointValue * Qty<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
      SHORT POSITION<\/strong><\/th><\/th><\/tr><\/thead>
      Account Balance on profit-target level<\/td>Amount = AccountSize + (EntryPrice \u2013 ProfitLevel) * PointValue * Qty<\/td><\/tr>
      Account Balance on stop-loss level<\/td>AccountSize \u2013 (StopLevel \u2013 EntryPrice) * PointValue * Qty<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
      <\/div>\n\n\n\n

      4 = Current Position Profit & Loss (PnL)<\/p>\n\n\n\n

      5 = Position Size (quantity)<\/p>\n\n\n\n

      LONG POSITION<\/strong><\/strong><\/th><\/tr><\/thead>
      Qty = Risk \/ ((EntryPrice \u2013 StopPrice) * PointValue)<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
      SHORT POSITION<\/strong><\/strong><\/th><\/tr><\/thead>
      Qty = Risk \/ ((StopPrice \u2013 EntryPrice) * PointValue)<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
      <\/div>\n\n\n\n

      6 = Risk\/Reward Ratio = ProfitOnTarget \/ LossOnStop<\/p>\n\n\n\n

      <\/div>\n\n\n\n

      Videos<\/strong><\/h3>\n\n\n\n
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