The risk-reward ratio calculator for mt4 is an indicator that calculates the risk ratio to the profits earned per open trade and shows real-time on the chart. It is also denoted by RR.
Here risk means the number of funds to be invested in a trade. Reward means the amount of profit earned by investing in a trade. Again, it can be a positive or negative amount.
Why is risk-reward important?
This is the most basic concept of forex risk management in technical analysis trading. If you are not managing your open trade with a proper risk-to-reward ratio, you are missing a significant opportunity to become a profitable forex trader.
The forex market is a trillion-dollar financial market. It is not very easy to profit from this forex market because you are competing with traders worldwide. While trading, sometimes you’ll lose some, and sometimes win some. Sometimes, you will lose trades in a row, significantly impacting your trading account and psychology. But an excellent risk-reward ratio helps to tackle this situation.
How risk-reward is calculated in mt4
For example, you open a trade in forex EURUSD currency pair in MetaTrader 4 platform. The size of stop-loss(SL) is 20 pips, and the size of take-profit(TP) is 40 pips. Fortunately, you won in this trade. Calculate the RR ratio.
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Risk amount = $20
Reward amount = $40
Total RR ratio = Risk / Reward = $20/$40 = ½
It means the R: R ratio of this EURUSD trade is one ratio of 2.
MT4 risk-reward indicator working
The mt4 risk-reward forex indicator has made it easy to calculate the RR in trading. It will show the real-time results of open trades on the chart. So you don’t need to calculate the risk reward each time for every trade. This mt4 forex indicator will do this task for you.
What is the best RR ratio size?
The optimum RR ratio always depends on the forex trading strategy. But the risk-reward(R: R) ratio must be greater than 1:2. For example, if you win three trades and lose five, you will be profitable.
The risk-reward ratio mt4 forex indicator is the best tool to use while trading. It will help forex risk management and save you a lot of time. A profitable forex trading strategy always consists of a better risk management system.