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Wednesday, August 6, 2008

Calculating Risk / Reward Ratios

Challenge Accounts:

Investing Account Balance:
Stock / Futures Trading Balance: $$1,009.79 (Within a Trade)
Online Savings Balance: $47.39

Personal Trading Thoughts: Within a long Ford Trade. Currently up about 7 cents. Any personal accounts with about 420 shares - would take the profits much quicker, than the Challenge Project account; where there is only 185 shares. And with less shares, the commissions hurt a tad bit more. Probably would dump out of the trade at about 4.78 or so. Whenever the 10 minute chart (whose trend is up) would show me that the trend is changing.

Personal Investing Thoughts: Overall, I'm just watching and waiting. Summer is here, and the market is generally weaker in the summer, so I'm not a buyer. Many years, I turn my DRIP off in the summer, and receive straight cash. But not this summer. We've been in a bear market, and the market is offering bargain prices on many stocks. Therefore, my DRIP will remain on, so that I can accumulate more shares at better prices to DCA ...

How do I think about my risk reward ratios? Well, I consider them before I ever get in the trade ...

* * *

Investing Account Balance: $334.13
Stock / Futures Trading Balance: $1,009.79 (Within a trade)
Online Savings Balance: $47.39

Total Trades: 5 (Within the 6th, but the statistics only cover 5)
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $62.40
Average Loss: $79.81
Accuracy Rate: 40%
Average Reward: $175.34
Risk : Reward Ratio: 1 : 2.2
Trading Money Gain / (Loss): Up + $111.50

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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