Your trade loss limit is a great start to managing your capital. However if your winning trades are not large enough, then you will still be depleting your trading account overall.
Your trade profit target is set by PlayMaker based on your win rate and your trade loss limit.The relationship between your loss limit and your profit target is known as the risk:reward ratio (Note, by convention it is actually written as reward:risk, so if your winnersare twice as large as your losing trades you would say your risk:reward ratio is 2).
Take a few minutes to examine this chart to show how there is no one size fits all for this setting.
Here we see many ways to get to breakeven (this is true for any performance goal you set).
The white squares show how you can get to break even for 6 different values of risk:reward. Let’s look some real examples.
If trade loss limit is $100 and trade profit target is $30 this is a risk:reward of 0.3.You can break even if you win 77% of your trades.
On the opposite end of the scale, if your trade loss limit is $100 and your trade profit target is $300, this is a risk:reward of 3. You can break even if you win 25% of your trades.
Clearly it is a lot less pressure if you only have to win 25% of the time to break even, but it means you need the skills to pick much larger winners and close small losing trades.
The reality is that most traders are somewhere in the middle. There is no correct answer as your targets will need to match your personal style.
PlayMaker knows your historical win rate, once you have a small number of trades executed (approx. 30). Therefore we will recommend the most achievable numbers for you to aim for.