Some Notes About Reward-Risk

Down with flu and been feeling like crap lately with a splitting headache so no strength to blog much. Anyway I was watching a webinar and heard something which is really useful but easily overlooked.

(Paraphrased) When price is breaking out, don't just take the trade. ALWAYS look to the left and see where price is breaking out into. Is it into an area of supply or is there room for it to run. 

That is essentially a statement about risk/reward and I think it is relevant to every single trade and not just breakout trades. It is very easy to be lured into taking a nice setup without first checking for nearby supply/demand zones where the trade could run into trouble. 

The reward-risk requirement for different setups is also different. For example I would require a higher reward-risk ratio for countertrend and breakout setups than for with trend pullback setups. This is as countertrend and breakout setups have a higher failure rate than pullback setups, and therefore would require  a higher win amount to result in an overall positive expectancy.