1. What is the Stop Loss and Target Calculator?

The Stop Loss and Target Calculator helps traders determine their profit target based on their entry price, stop loss level, and desired risk-reward ratio. This is fundamental for proper risk management in trading.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( Entry \) — Entry price of the trade
• \( SL \) — Stop loss price
• \( RR \) — Risk-reward ratio (e.g., 2 for 1:2 ratio)

Explanation: The formula calculates how far your target should be based on how much you're risking (distance from entry to stop loss) multiplied by your risk-reward ratio.

3. Importance of Risk Management

Details: Proper risk management is crucial for long-term trading success. Using stop losses and targets helps maintain discipline and ensures you risk less than you aim to gain.

4. Using the Calculator

Tips: Enter your entry price, stop loss price, and desired risk-reward ratio. All values must be positive numbers. The calculator will show your ideal target price.

5. Frequently Asked Questions (FAQ)

Q1: What is a good risk-reward ratio?
A: Most professional traders recommend at least 1:2 (RR = 2), meaning your potential profit is twice your potential loss.

Q2: Should I always use this formula?
A: While useful, also consider support/resistance levels and market conditions when setting targets.

Q3: What if my stop loss is above my entry (short trade)?
A: The formula works the same way - it will calculate the target below your entry price.

Q4: How precise should my target be?
A: Targets can be approximate - consider rounding to significant price levels.

Q5: Can I change my risk-reward ratio per trade?
A: Yes, but maintaining consistency helps with overall strategy evaluation.