{"id":1022116,"date":"2022-09-16T16:24:55","date_gmt":"2022-09-16T23:24:55","guid":{"rendered":"https:\/\/www.tradingheroes.com\/?p=1022116"},"modified":"2024-03-08T21:35:41","modified_gmt":"2024-03-09T04:35:41","slug":"risk-reward-tool-mt5","status":"publish","type":"post","link":"https:\/\/www.tradingheroes.com\/risk-reward-tool-mt5\/","title":{"rendered":"The Risk Reward Tool Already in MetaTrader 5"},"content":{"rendered":"<p>You don't need to buy a separate indicator or EA to see the risk\/reward ratio on every trade. MT5 already has a built-in measurement tool to do that.<\/p>\n<p><strong>The Fibonacci Retracement tool in MT5 can be easily altered to show the risk\/reward ratio on any trade. Open the settings of the tool, then add risk multiples to the Levels tab.\u00a0<\/strong><\/p>\n<p>Once you know this trick, you'll probably find yourself using this tool a lot.<\/p>\n<p>Here's how to do it&#8230;<\/p>\n<h2>Tutorial Video<\/h2>\n<p><iframe loading=\"lazy\" title=\"YouTube video player\" src=\"https:\/\/www.youtube.com\/embed\/PUsqRYwYd-E\" width=\"840\" height=\"450\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><span data-mce-type=\"bookmark\" style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" class=\"mce_SELRES_start\">?<\/span><\/iframe><\/p>\n<p>Watch more of my videos on my YouTube channel.<\/p>\n<h2>Risk\/Reward Ratio Calculation<\/h2>\n<p>This ratio is commonly known as the risk\/reward ratio, but it should be more accurately referred to as the reward\/risk ratio.<\/p>\n<p>The ratio is actually calculated with the amount of reward on the top of the fraction and the risk on the bottom.<\/p>\n<p>For example, if a closed trade has 500 pips of profit and had 100 pips of risk, the formula looks like this:<\/p>\n<p>500 \/ 100 = 5<\/p>\n<p>So the reward\/risk ratio in this example is 5.<\/p>\n<p>That's how the reward to risk ratio will be shown in the MetaTrader 5 tool.<\/p>\n<h2>Why Reward\/Risk is Important in Trading<\/h2>\n<p><strong>Knowing your reward\/risk on each trade is key to figure out the long-term viability of your trading strategy.\u00a0<\/strong><\/p>\n<p>For example, if you have an average reward to risk ratio of 1 on your trades, this means that you should have a greater than 50% win rate in order to be profitable.<\/p>\n<p>If you have a lower win rate, your average reward\/risk will have to be higher to be profitable.<\/p>\n<p>Then of course, you don't need to have a high reward\/risk ratio if you have a high win rate.<\/p>\n<p>Now that you understand how it works, let's get into how to add it to your MetaTrader 5 chart.<\/p>\n<h2>Add the Fibonacci Tool to a Chart<\/h2>\n<p>Start by adding the Fibonacci tool to your chart.<\/p>\n<p>This is what it looks like on your toolbar.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-1022120 aligncenter\" src=\"https:\/\/www.tradingheroes.com\/wp-content\/uploads\/fibonacci-retracement.jpg\" alt=\"Fibonacci tool\" width=\"278\" height=\"137\" \/><\/p>\n<p>Click anywhere on the chart, then drag the tool, so the tool expands and you can see the levels.<\/p>\n<p>At first, you'll see the traditional Fibonacci Retracement tool settings.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-1022121 aligncenter\" src=\"https:\/\/www.tradingheroes.com\/wp-content\/uploads\/Screen-Shot-2022-09-15-at-10.43.11-PM.png\" alt=\"Fibo retracement\" width=\"381\" height=\"316\" \/><\/p>\n<p>If you're going to use the tool to measure Fibonacci retracements, then keep these settings.<\/p>\n<p>Otherwise, you can delete the retracement settings in the next step.<\/p>\n<h2>Customize the Tool<\/h2>\n<p>Now that you have the tool on your chart, first make sure that the squares are displayed on the diagonal line.<\/p>\n<p>You'll see the squares in the screenshot below.<\/p>\n<p>If the squares aren't there, then double click on the diagonal line to show the squares.<\/p>\n<p>Once you see the squares, right-click on the diagonal line to show the Fibo settings menu.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-1022122 aligncenter\" src=\"https:\/\/www.tradingheroes.com\/wp-content\/uploads\/Screen-Shot-2022-09-15-at-11.21.17-PM.png\" alt=\"Tool settings\" width=\"489\" height=\"292\" \/><\/p>\n<p>Then select <em>Properties&#8230;<\/em><\/p>\n<p>First, delete the unnecessary levels.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-1022123 aligncenter\" src=\"https:\/\/www.tradingheroes.com\/wp-content\/uploads\/Screen-Shot-2022-09-15-at-11.55.45-PM.png\" alt=\"remove settings \" width=\"433\" height=\"265\" \/>Then add the first level.<\/p>\n<p><strong>Risk will be determined by the distance between the 0 and 1 levels.<\/strong><\/p>\n<p>Therefore, in order to create a 1 times risk measurement, we have to create a level that has the same size as the distance between 0 and 1.<\/p>\n<p>So the first level will be 2 because that's 1 larger than 1.\u00a0 You can put anything you want into the description.<\/p>\n<p>I use 1R, or 1 times risk.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-1022124 aligncenter\" src=\"https:\/\/www.tradingheroes.com\/wp-content\/uploads\/Screen-Shot-2022-09-16-at-12.12.01-AM.png\" alt=\"Add first level\" width=\"440\" height=\"268\" \/><\/p>\n<p>Add as many levels as you want.<\/p>\n<p>I like to go up to 10R.<\/p>\n<p>Here's what it looks like on the chart.<\/p>\n<p>This move had a potential 7.5R of profit.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-1022125 aligncenter\" src=\"https:\/\/www.tradingheroes.com\/wp-content\/uploads\/Screen-Shot-2022-09-16-at-12.43.32-PM.png\" alt=\"10R on chart\" width=\"529\" height=\"436\" \/><\/p>\n<p>You can also create fractions of a level, if that's something you use in your trading.<\/p>\n<p>For example, you could set a 1.5R level.<\/p>\n<h2>How to Use the Reward\/Risk Tool<\/h2>\n<p>Once you've customized the Fibonacci tool and turned it into a reward\/risk tool, the settings will stick until you change the settings again.<\/p>\n<p>Now that you have this set up, let's take a look at how to actually use it.<\/p>\n<p><em>There are a couple of ways that you can use this tool&#8230;<\/em><\/p>\n<p><strong>First, it can be used to check if there's enough room for you to make the risk multiple that you want to make on a trade you're about to take.<\/strong><\/p>\n<p>For example, if your strategy requires a minimum 1R profit target, you can easily see where price would have to get to on your chart, in order for you to make 1R.<\/p>\n<p>If that profit target seems reasonable given the current price action, then you can take the trade. Otherwise, you can pass.<\/p>\n<p><strong>Next, you can evaluate closed trades to see how much profit you could have made.<\/strong><\/p>\n<p>If enough of your trades have more potential profit than actual profit, then you could look for ways to trail your stop to make more profit.<\/p>\n<h2>Bonus: Add the Price to Each Reward\/Risk Line<\/h2>\n<p>Now you can see your reward levels on your MT5 chart, but wouldn't it be great to see the actual price that the levels are at?<\/p>\n<p>Luckily, there's an easy way to do this in MT5.<\/p>\n<p>On each level, add the following to the description of each line to show the price that the line is at.<\/p>\n<p><strong>%$<\/strong><\/p>\n<p>While you're at it, you can also change the 0 and 100 levels to <strong>Stop Loss<\/strong> and <strong>Entry<\/strong>, respectively.<\/p>\n<p>This is what my settings look like.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-1022118 aligncenter\" src=\"https:\/\/www.tradingheroes.com\/wp-content\/uploads\/Screen-Shot-2022-09-15-at-9.59.02-PM.png\" alt=\"Risk \/ reward tool settings\" width=\"432\" height=\"262\" \/><\/p>\n<p>This is what it looks like on the chart.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-1022119 aligncenter\" src=\"https:\/\/www.tradingheroes.com\/wp-content\/uploads\/Screen-Shot-2022-09-15-at-10.02.29-PM.png\" alt=\"Tool on chart\" width=\"408\" height=\"360\" \/><\/p>\n<p>After you select the tool, start by clicking on the entry price of your trade.<\/p>\n<p>Then drag the tool to your <a href=\"https:\/\/www.tradingheroes.com\/place-stop-loss-order\/\">stop loss<\/a> price.<\/p>\n<p>Now you can see the exact price of all the profit levels.<\/p>\n<p>This makes it easy to enter take profit levels when you're trading.<\/p>\n<h2>Final Thoughts<\/h2>\n<p>This simple hack to the Fibonacci Retracement tool creates a free and easy way to measure risk vs reward.<\/p>\n<p>Set it up once and you'll always have it handy.<\/p>\n<p>You can also use this method on other trading platforms, when you want an easy to use reward\/risk tool.<\/p>\n<p>Get more <a href=\"https:\/\/www.tradingheroes.com\/tag\/metatrader-5-tutorials\/\">MetaTrader 5 tutorials here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>There&#8217;s a risk\/reward tool already in MetaTrader 5, you don&#8217;t have to buy an indicator. Learn how to unlock it and how to use it. <\/p>\n","protected":false},"author":2022,"featured_media":1022127,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[201007],"tags":[201638],"class_list":["post-1022116","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-trading-software-tutorials","tag-metatrader-5-tutorials","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Risk Reward Tool Already in MetaTrader 5 - Trading Heroes<\/title>\n<meta name=\"description\" content=\"There&#039;s a risk\/reward tool already in MetaTrader 5, you don&#039;t have to buy an indicator. 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