Risk/Reward tool helps you to calculate the position size based on the maximum risk you are willing to take opening the position, as well as estimate the Profit & Loss (PnL) and calculate the value of your account balance once the profit-target or stop-loss will be reached.
How to use it #
1) Start inserting the tool:
- by pressing Risk/Reward button on drawings toolbar
- or by selecting from Workspace window the Insert menu > Drawing > Risk/Reward
![](https://www.overcharts.com/en/helpcenter/wp-content/uploads/2022/06/risk-reward-toolbar1.jpg)
2) Draw Position Entry, Profit-Target and Stop-Loss levels on chart
![](https://www.overcharts.com/en/helpcenter/wp-content/uploads/2022/06/risk-reward-overview2.jpg)
3) Calculate position size based on the maximum risk you are willing to take
If you already know the position size then set the following properties in drawing tool configuration:
Calculation Method: Fixed
Value: enter the Position Size (quantity)
![](https://www.overcharts.com/en/helpcenter/wp-content/uploads/2022/06/risk-reward-ps-fixed1.jpg)
If you want to automatically calculate the position size based on the maximum risk you are willing to take, set the following properties in drawing tool configuration:
Account Size: set the account balance (total cash amount of your account)
Calculation Method: Automatic
Risk: The sum you are willing to lose in the position can be calculated in two ways:
- Cash: set the maximum loss cash amount
- Percentage: set the percentage of Account-Size that you are willing to lose
![](https://www.overcharts.com/en/helpcenter/wp-content/uploads/2022/06/risk-reward-ps-auto-cash1.jpg)
![](https://www.overcharts.com/en/helpcenter/wp-content/uploads/2022/06/risk-reward-ps-auto-perc1.jpg)
Further information #
Let’s see in detail all information available and how it is calculated:
![](https://www.overcharts.com/en/helpcenter/wp-content/uploads/2022/06/risk-reward-overview1.jpg)
1 = Entry, Target, Stop Price Levels
2 = Profit or Loss once the profit-target or stop-loss levels are reached
3 = Account balance once the profit-target or stop-loss levels are reached
LONG POSITION | |
---|---|
Account Balance on profit-target level | Amount = AccountSize + (ProfitLevel – EntryPrice) * PointValue * Qty |
Account Balance on stop-loss level | Amount = AccountSize – (EntryPrice – StopLevel) * PointValue * Qty |
SHORT POSITION | |
---|---|
Account Balance on profit-target level | Amount = AccountSize + (EntryPrice – ProfitLevel) * PointValue * Qty |
Account Balance on stop-loss level | AccountSize – (StopLevel – EntryPrice) * PointValue * Qty |
4 = Current Position Profit & Loss (PnL)
5 = Position Size (quantity)
LONG POSITION |
---|
Qty = Risk / ((EntryPrice – StopPrice) * PointValue) |
SHORT POSITION |
---|
Qty = Risk / ((StopPrice – EntryPrice) * PointValue) |
6 = Risk/Reward Ratio = ProfitOnTarget / LossOnStop