This is a departure from what I normally write about, probably because I’m moving in the direction of becoming a trader. However, normally only about 2% are actually profitable, which is where I plan to be. One issue I’ve been running up against is trying to quickly figure out a good stop-loss point taking into account a risk reward ratio of 1:3 or variations thereof depending on entry, exit, and stop prices.
This a image of the spreadsheet I created in Apple’s Numbers. I tried exporting it to Excel, but it takes each table and makes it into its own sheet. In Numbers each table is on one page. The two programs function similarly, but deal with multiple tables differently. Therefore if you want to play around with either the Numbers or Excel version let me know and I’ll either post it or send it to you.
What I like about this spreadsheet is that I can take the current price of an equity, decide if I’m going long or short and by looking at the total equity of an account and maximum risk per trade am able to determine my optimal strategy and if the trade even makes sense.
The Long Matrix and Short matrix have no changeable variable unless you want to play with the number of shares, which depending on the size of your account you might want them to be larger or smaller. In my example I used an account balance of $50,000.00 and a maximum risk of 1.5% total account balance or $750.00 per trade.
The Long and Short tables are for more custom entry and exit points. Say you are using retracements or trendlines, which don’t correlate to the matrix and you want to know what your risk:reward ratio is going to be given your examination of the price movement.
For the long you buy 100 shares @ $35.21 with a stop at $31.00, which is a potential loss of $421.00 or 11.96% of the trade, and 0.84% of your total account. If your price target of $65 is reached you will have made 84.61% with a risk:reward of 1:7, which is a very good trade.
This is a completely hypothetical example and is not intended as a trade recommendation.