Commonly it has been told that Risk:Reward ratio ideally should be 1:2 i.e. if my target is Rs.5/- my stop loss should be Rs.2.5/- to have such ratio. However, i have faced a situation many times like hitting my SL first with heavy losses and then to hit my target. To avoid such scenario; what should be min/max % of SL on my entry price?
In some videos on YouTube, i have seen that SL should be 2ATR and target should be 4ATR. however, i do intraday in FnO and interested in taking small but quick profits. i.e. if lot size is big just 20/30 paisa profit is OK for me and don’t want to be greedy, since trading with discount broker like Zerodha. In this situation what should be my SL and What should be my Target?
The method I prefer to use is based on a technique known as maximals. What this does is give a precise formula to work out the probability of the price moving a certain distance from the open during a given time.
This estimation gives a complete distribution of price moves for a given volatility. This method works for any timeframe, minutes hours or even months. It also works equally well with either historical (past) or implied (future) volatility. MMF Solutions have some Forex Tips Providers that definitely help you in getting exact % of stop loss and target price.
As per my opinion, it depends on volatility of stock, volume of your trade, trends of market and many other factors but generally speaking P:L=3:1.
However you can find good explanation on below site >>>
Where will i get this maximls formula?