This video looks at how to fine-tune your profit targets, so you can make big reward:risk trades while still having a good chance of the price reaching that target. This is the fifth video in the Forex Swing Trading in 20 Minutes Course.
A really great profit target is a balancing act between maximizing the return and giving the market a reasonable chance of hitting that target. A big reward:risk means nothing if the price never actually hits that lofy target.
In this video I show how I maximize returns, to create trades with 8:1, 13:1 and even 20:1 reward to risk ratios based on market structure (make 20% on your account, when you only risk 1%). That means that even though we are making a huge return, the market has shown a tendency to reach these sorts of targets, and there is a good chance it can do it again.
The market provides these types of opportunities each month, so they are not rare. Even if you win only 2 or 3 trades out of 10, you can make monthly profits by maximizing your reward:risk with this approach. Using the crotch strategy and trend trading strategy on the daily/4-hour time frame combination I find about 5 to 6 trades a month that offer a 10:1 or greater reward to risk. With the 4-hour/1-hour timeframe combination, I typically find about 6 to 10 trades each month with these big R:R ratios. There are usually more than 10 trades each month that offer a reward:risk in the 3:1 to 9:1 area. For more information on these time frames and strategies, see the earlier videos in this course listed below.
If you are placing good entries, reading price action well, setting your targets at good levels (based on the structures playing out) you should be able to have about 4, 5 or 6 winning trades out of 10. When you are making 10% on winners and only losing 1% on losers, the gains can add up fast.
It’s important to watch the other videos in the Forex Swing Trading in 20 Minutes video series to see the entry and risk management methods that work well with this profit target method.
Vid. 1 – Forex Swing Trading in 20 Minutes – Pairs to Follow and Setting Up Charts
Vid. 2 – Forex Swing Trade in 20 Minutes – Time Frames and Trend Trading Strategy
Vid. 3 – Forex Swing Trading in 20 Minutes – Crotch Strategy and Strong Support and Resistance
Vid. 4 – Forex Swing Trading in 20 Minutes – Position Size and Risk Management
Hope that helps you out!
Watch the next video in this free series:
To learn more about how to day trade and/or swing trade forex, including basics to get you started, strategies and a plan to get you practicing and successful, check out my Forex Strategies Guide for Day and Swing Traders 2.0 eBook.
By Cory Mitchell, CMT