Assume you are looking at a stock that is trading at $10.00/share. The price movements are looking like it will go higher and you want to take an entry because it looks like it could head to $10.75 where it will find some price resistance. You like this trade because it looks like there is price support around $9.75 where it made a low on some bottoming price action. So if you get an entry price of about $10.00/share, then you are risking $0.25 ($10.00 - $9.75 stop) to make $0.75 ($10.75 exit - $10.00). This is a good trade because the reward is 3 times the risk (reward $0.75 versus $0.25
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