Additionally, we need to set out stops at odd dollar amounts to avoid institutional stop hunters.For our profit targets, we will look at the next significant level of support or resistance. We’ll aim to exit the trade just before that level is reached. Thus, we hope to avoid the risk of another swing point, turning the trade against us.
It’s up to each individual to decide what is an acceptable risk/reward ratio. But the important thing is to observe our own risk management rules at all times. If you’ve set a minimum of 1:2 in your trading plan, then don’t depart from it, no matter how enticing a set-up may look.