Skillsfirst Level 5 Diploma in Financial Trading (RQF) - Module 4 - Technical Analysis
Skillsfirst Level 5 Diploma in Financial Trading (RQF) - Module 5 - Psychology
Skillsfirst Level 5 Diploma in Financial Trading (RQF) - Module 6 - Risk and Money Management
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EXPECTED RETURN

This is the monetary return or loss probability from any potential trade and having S/L & T/P is important when calculating expected return. Having expected returns calculations will challenge traders to quantify and questions their trade strategy/plan, more importantly it is a systematic approach to compare your various trade ideas and only enter the most profitable ones.

The formula to calculate expected returns:-

[ (Probability of Gain) x (Take Profit % Gain)] + [ (Probability of Loss) x (Stop Loss % Loss) ]

With the resulting figure, a trader can compare various opportunities to determine which trades have the better probability for profit or loss and utilise their trading capital astutely. The probability of gain or loss can be calculated by using historical breakouts and breakdowns from the support or resistance levels; or for experienced traders, by making an educated guess.

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