Risk Reward Ratio Indicator
The success or failure of forex trading mostly depends on money management. As everyone knows, whenever trade is opening there is a risk of losing money. That is why it is so important to control risk.
Using risk/reward ratio in trading
Using the Risk Reward Ratio for the MetaTrader platform, you will be able to estimate the risk of each transaction opened on the forex market. Thanks to this forex tool, you can check the risk to reward ratio of each planned trade and exactly check the size of your potential profit and possible loss in the account currency.
Let's consider example:
For 10 transactions, there are 5 profitable transactions and 5 losing transactions (50% of efficiency).
If Risk Reward Ratio = 2, in these 10 transactions, the loss will be $250 ($50 per trade) and the profit will be $500 ($100 per trade), so the account will increase by $250.
Forex Lot Size Calculator
You can also use this indicator as a forex lot size calculator. In the indicator's parameters, set the maximum percentage of capital that you can lose on a single transaction. Then, move stop loss line on the chart to set trade exit level on the loss and indicator will automatically calculate the lot size. Thanks to this indicator you will never have to manually calculate lot size saving a lot of time. Using the Risk Reward Ratio Indicator, you will be aware of risks of forex trading and placing orders will be quick and easy.
How to use Risk Reward Ratio Indicator
Step 1: Draw lines
- click the draw button (with pencil) and then click on the chart where you want to place the „Open” line.
Step 2: Move lines
- double click on lines and move them to specified levels where you planned to open order and set stop loss and take profit.
Step 3: Adjust lot size
- set lot size in panel and read what is your stop loss and take profit value in account currency
- if FixedRisk = true, then the indicator will calculate the lot size automatically depending on the selected risk (the AllowedRiskPercent parameter) and stop loss distance.
Step 4: Place order
- run RRR_SendPendingOrder or RRR_SendOrder script to place/open order (all scripts are available to download in "Comments" tab).
Step 5: Clear lines
- click button clear (with rubber) to remove lines from chart.
- AllowedRiskPercent – acceptable risk of single transaction according to account balance (allowed values from 0.1 to 100).
- FixedRisk – turn on/off autoadjusting lot size to risk percent set in the “AllowedRiskPercent” parameter.
- AcceptableRiskColor – font color of risk%, if it is smaller or equal than acceptable risk (set by the AllowedRiskPercent parameter).
- UnacceptableRiskColor – font color of risk%, if it is greater than acceptable risk (set by the AllowedRiskPercent parameter).
- Prefix & Suffix - sometimes indicator must read price of other symbol to properly calculate current pair or CFD profit and loss in currency. In some cases, pairs have additional prefix and/or suffix, e.g. “EURUSD.Pro”. In this case, you should write “. Pro” into suffix field.
- LineStyle – select line style from list (solid, dash, dot, etc.).
- LineColor – line color.
- TextColor – label text color.
- HorizontalAlign – panel can be horizontally aligned to left/right border or center.
- YDistance – distance in pixels from top.
- PanelFontColor – panel text color.
- CFDCurrency – symbol of quotation currency for CFD symbols needed for proper computations of profit and loss in currency.
- slimmed panel
- possibility to hide or show panel
- automatic lots calculation based on fixed risk % and stop loss distance
- possiblity of changing the indicator's panel location
- Calculate a percentage of account risk.