Risk-reward¶
The risk-reward feature in cTrader is demanded by investors who need to accurately define the position size before placing an order. Depending on their risk tolerance and reward anticipation, traders can instantly calculate the correct quantity for all order types and trade directions, with an interactive visualisation provided directly in the chart area.
Risk-reward in One Minute!
- Risk-reward allows traders to quickly calculate the position size relying on their preferred risk-reward ratio.
- When applying the feature, traders can choose which parameter will be ‘pinned’ - risk, reward, or size.
- The available calculation modes for investors’ convenience include cash, balance percentage, equity percentage, or order volume.
- After an order is placed, the protection mechanisms will fully correspond to the selected risk-reward ratio.
This guide will explain in detail how to use risk-reward and configure its parameters in cTrader.
How to Add Risk-reward¶
Click on the ‘Risk-reward’ button in the toolbar with other objects and instruments.
Here, you can choose between the three main options for position size calculation, namely risk, reward, and size whose values will be ‘pinned’. Both buy and sell directions are available for each (e.g., ‘Fixed-risk buy’ and ‘Fixed-risk sell’ options in the menu). Upon selecting the needed option, left-click anywhere on the trading chart being guided by your preferred price and time coordinates.
You can also apply the risk-reward feature to a fully or partially elapsed time period by placing the object on past candlestick bars. By doing so, you can witness how your position could have performed in the past with the established protection mechanisms.
Note
When applying risk-reward to historical prices on the chart, you will see a highlighted area (green or orange) outlining the past possible deal. A dotted line will snap to the chart prices at the start and the end of the highlighted area.
How to Customise Risk-reward Parameters¶
The entire risk-reward object can be moved within the boundaries of the trading chart by dragging and dropping it. Additionally, you can expand/shrink the risk and reward areas along the vertical and horizontal axes by dragging the parameter controls (i.e., grey dots). After hovering over the grey dots, arrows will prompt the directions in which the risk-reward object can be modified.
Warning
Only the value corresponding to your selected calculation mode (i.e., risk, reward, or size) will remain fixed after moving the parameter controls of the risk-reward object. You will see a pin icon next to this value reflected in cash, balance percentage, equity percentage, or lots/units. The ‘pinned’ value can be anyway adjusted via the settings menu of risk-reward.
Example
You selected the ‘Fixed-risk buy’ calculation mode, and the maximum amount in cash you wish to risk is USD 500, which remains the ‘pinned’ value on the chart. By dragging the risk parameter control along the price axis, you establish a stop loss at 149.2 pips away from the entry price. With these protection mechanisms, your calculated position size equals 1.45 lots.
If you reduce the risk (stop loss) distance to 99.7 pips with the same risk calculation mode and amount, cTrader will suggest that you place a stop buy order for 2.17 lots. Naturally, your risk-reward ratio and potential reward in cash will increase in the second case.
To configure the parameters of risk-reward, click on the ‘Settings’ icon in the risk-reward toolbar. Note that the toolbar is not displayed in the chart area when the risk-reward object is inactive. Alternatively, right-click on the risk-reward object to open its settings.
In the ‘Settings’ window, you can customise the order type, trade side, calculation mode and its value, entry price, valid quantity, stop loss, take profit, fixed risk-reward ratio, snapping to chart prices, and object visualisation.
Note
Certain fields in the ‘Settings’ window are sensitive to the order type and calculation mode. For instance, you will not be able to define any stop loss protection mechanism for the ‘Reward’ calculation mode. ‘Take Profit’ will remain inactive for the ‘Risk’ calculation mode.
Tip
You can alter the calculation mode and trade side of an existing risk-reward object on the chart via the ‘Settings’ menu. It is not necessary to delete and draw a new object.
If you enable the ‘Fixed risk-reward ratio’ flag in the ‘Settings’ menu, you will lock the risk-reward ratio at a specific value. In this case, the risk and reward parameter controls will be dragged simultaneously along the vertical axis when adjusted. You can still move the entire risk-reward object and expand/shrink it along the horizontal axis.
When the ‘Snap to chart prices’ flag is enabled, the risk-reward object will stick to the historical price extremes if placed in the bars area.
After customising your risk-reward parameters, click on ‘OK’ to close the ‘Settings’ window. The ‘Reset to Default’ button resets only the graphical settings.
How to Place an Order¶
The risk-reward feature offers its own functionality for instantly placing an order based on the calculated position size. Click on the ‘Buy’ or ‘Sell’ button located to the right of the suggested amount in lots/units. The button will indicate the direction of trade selected by you earlier.
Warning
If you are uncertain about the order type (i.e., market, limit, stop, or stop limit) that will be placed, double-check and modify it (if needed) in the settings of risk-reward. In case the market order type is selected, the position will be opened at the current price, regardless of where the risk-reward object was placed.
The order will be placed in full accordance with the defined parameters and protection mechanisms.
Warning
When the lot fraction suggested by risk-reward is smaller than the minimum traded quantity of the symbol, cTrader will not allow you to place an order. In this case, the suggested order volume will be greyed out after applying risk-reward. Click on the ‘Round up’ button next to the position size to adjust the order quantity, and it will be automatically updated. You can also access the ‘Round up’ functionality from the settings menu of risk-reward.
How to Manage Risk-reward¶
In addition to ‘Settings’, the toolbar offers several other functionalities for managing risk-reward. Note that the toolbar can be moved within the trading chart area.
- ‘Snap to chart prices on/off’ - The risk-reward object will (not) stick to extreme historical prices if placed in the bars area. The magnet icon offers the same functionality as the ‘Snap to chart prices’ flag in the risk-reward settings.
- ‘Lock/Unlock’ - The risk-reward object will be locked/unlocked for dragging within the chart area.
- ‘Duplicate’ - Duplicate the risk-reward object with the same parameters.
- ‘Delete’ - Delete the risk-reward object from the chart. You can also delete the object by clicking on it and pressing the Del key.
You can manage all your risk-reward objects in one place via ‘Object Manager’. To call this window, press the ‘Drawings’ button in the main tool panel or simply use the Ctrl+D hotkeys.
The additional functionalities that are available for all objects in this window include:
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‘Move to all-symbol/current’ - The risk-reward object will become visible on any symbol in this chart container.
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‘Hide/Show object’ - The risk-reward object will appear/disappear from the trading chart.
You can hide/show all risk-reward objects at one click by pressing the ‘Hide/Show All Drawings’ button in the main tool panel or simply using the Ctrl+H hotkeys.
In the ‘Object Manager’ window, you can delete risk-reward objects one by one, per symbol, all-symbol, or click on the ‘Remove All Drawings’ button at the bottom.
By clicking on the ‘Share’ button located to the right of ‘Buy/Sell’, you will copy a signal link for a pending order with the predefined protection mechanisms. You can distribute this link via your communication channels.
Summary¶
To conclude, risk-reward is a powerful feature for traders willing to accurately calculate the correct position size in accordance with their preferred risk-reward ratio and investment targets. The diversity of the risk-reward calculation modes in cTrader provides users with flexible and comprehensive settings. As a result, orders of different types are placed strictly in accordance with the defined protection mechanisms, which allows for adopting a sustainable investment strategy.