My trading motto is “Be clear on my trade set-up and risk-reward, AND find out the catalyst for current stock price movements”.
Finding out the catalyst, as what I have mentioned earlier, is keeping up with market news.
When we talk about managing risk and using a risk-reward ratio, it is about HOW MUCH WE GAIN when we are right and HOW MUCH WE LOSE when we are wrong. Then we perform all that TA magic to find out if the ratio is satisfactory for us to enter a trade. To control how much we lose when we are wrong, we need to have a stop loss or trailing stop loss in place. We could do a trade set-up and risk-reward BEFORE a trade fairly rationally. So we started off very convinced that we would make money. However, when time comes for execution and we are in the trade