Assessing Risk and Reward the Correct Way!
Many traders insist on fixed risk-reward ratios like 2:1 or 3:1. This seems simple. But it’s often nonsense. Rigid rules ignore market context. Volume price analysis (VPA) offers a better way. Let the chart decide risk and reward naturally.
Many traders talk of risk and reward and the fact they do not take a trade unless there is a 3 to 1 risk reward ratio or 2 to 1 – but how do they know, and does the market actually care what they need or want! There is a simple and logical way to assess the risk on each trade, and any potential reward by studying the chart and from there deciding whether to take the trade or not. The chart will reveal in multiple timeframes what is ahead and therefore likely to offer support or resistance, or where the market is likely to congest. Then and only then can you make a decision based on your reading of the chart.
Use Support and Resistance from the Chart
Identify key support and resistance levels. These are validated by volume. Place stops just beyond them. Targets go to the next logical level. Risk-reward emerges from price action. It might be 1:1 in tight ranges or 4:1 in strong trends.
Why This Flexible Approach Wins
Fixed ratios force bad trades. You skip high-probability setups with “only” 1.5:1 reward. Or take low-probability 3:1 trades blindly. VPA focuses on expectancy—win rate times average reward. Quantum indicators on NinjaTrader or MT5 highlight levels clearly. Trend Monitor and VPOC guide dynamic stops/targets.
Anna Coulling’s VPA methodology teaches this flexibility. It builds consistent results. Assess risk-reward with the chart and volume, not arbitrary rules. Quantum tools make it simple and effective. Trade what the market offers for long-term success.