How To Calculate Risk For Split Trades
There is a difference in calculating risk for single trades and split trades. When you are calculating risk for split trades you want to measure or judge each trade individually or each position separately.
Here’s my method and example on calculating R on a trade with two split positions:
S/L: 1.5563 Risk 247 pips
SELL: 1.5316
T1: 1.5069 247 pips
T2: 1.4930 386 pips
If trade# 1 hits Target 1, then the R is calculated as follows:
247 / 247= 1.0
Since T1 is only half of the trade I calculate the R for this trade in the in the following manner 1.0 x0.5 or 0.5 R is the R for this trade.
I still have an open trade that is moving toward target #2 (T2). If it reaches T2 than the R for T2 is calculated as follows:
386 / 247= 1.56 R
However since it is only half of the original trade, I have to adjust this calculation as well. Here is the correct formula:
1.56 x 0.50= 0.78 R
We then combine the two R’s for both positions to get the total R for this trade.
Position 1: 0.50 R
Position 2: 0.78 R
Total R for the trade = 1.28
So, for every dollar risked on this trade, I made $1.28 cents.
*Note: You should be aware that according to this method i.e. calculating R on split trades the R is lower than if you were to calculate R on a single trade. A single trade R (on the above trade) would have been 1.56 R.
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