Stock Market Beginner’s Weekly Educational Guide 4 Day-3 : Understanding Volume in Trading by CapitalKeeper
By CapitalKeeper | Beginner’s Guide | Indian Sock Market | Market Moves That Matter I 1st July 2025
Week 4 – Day 3: Risk-Reward Ratio & Trade Journaling – The Secret to Consistent Profits
🎯 Objective:
Help new and aspiring traders build long-term profitability through proper risk-reward management and consistent trade journaling.
What is Risk-Reward Ratio (RRR)?
The Risk-Reward Ratio compares your potential loss on a trade to the potential gain.
Formula:
Risk-Reward Ratio = Potential Loss / Potential Gain
✅ Example:
- You buy a stock at ₹100
- Stop-loss = ₹95
- Target = ₹115
- Risk = ₹5 | Reward = ₹15
- RRR = 1:3 (Ideal!)
🎯 Golden Rule: Never risk more than you can gain. Stick to minimum 1:2 or 1:3 RRR for consistency.
🛠️ How to Use RRR in Daily Trading:
| Step | What to Do |
|---|---|
| 1. Define Entry | Use breakout or pattern confirmation |
| 2. Set Stop Loss | Based on chart (support/resistance/ATR) |
| 3. Set Realistic Targets | Based on technical levels, Fibonacci, or RRR |
| 4. Place Trades Only If | RRR is 1:2 or better |
📌 Note: Avoid overtrading even in high conviction setups if RRR is below 1:1.
📓 Trade Journaling: Your Path to Improvement
A trade journal is your personal trading logbook. It helps track:
- Winning & losing trades
- Emotional patterns
- Strategy performance
- Areas for improvement
📘 What to Record in Your Trade Journal:
| Field | Sample Entry |
|---|---|
| Stock Name | ITC |
| Entry Price | ₹440 |
| Stop Loss | ₹425 |
| Target Price | ₹475 |
| Actual Exit | ₹468 |
| RRR Achieved | 1:2.3 |
| Reason for Trade | Bullish breakout from flag + RSI confirmation |
| Mistakes/Learnings | Exited early due to news panic |
🧠 Use Excel, Notion, Google Sheets, or apps like TraderSync or Edgewonk.
🚀 Benefits of Risk Management & Journaling:
| Risk-Reward Discipline | Journaling Habit |
|---|---|
| Consistent capital growth | Reflective improvement |
| Limits emotional trading | Builds accountability |
| Helps scale trades smartly | Identifies winning strategies |
🔎 Common Mistakes to Avoid:
- Setting random stop-loss levels
- Ignoring reward zones in favor of quick exits
- Not recording emotions or lessons after a trade
- Chasing trades with poor RRR
Quick Recap:
| Tip | Why It Matters |
|---|---|
| Always check RRR before entry | Prevents unnecessary risk |
| Use fixed SL + flexible target | Gives trades room to breathe |
| Log every trade in journal | Sharpens decision-making over time |
| Analyze journal weekly | Spot winning setups and avoid past errors |
📍 Conclusion:
If you can master the discipline of managing risk and learning from your own trades, your path to profitable trading becomes much clearer.
✨ Every great trader tracks two numbers:
→ Risk-Reward and
→ Trading Mistakes
Start yours today on CapitalKeeper.in 📊
investment insights — follow us on [Telegram] and subscribe to our newsletter!
📌 Disclaimer
The content provided on CapitalKeeper.in is for informational and educational purposes only and does not constitute investment, trading, or financial advice. While we strive to present accurate and up-to-date market data and analysis, we make no warranties or representations regarding the completeness, reliability, or accuracy of the information.
Stock market investments are subject to market risks, and readers/investors are advised to conduct their own due diligence or consult a SEBI-registered financial advisor before making any investment decisions. CapitalKeeper and its authors are not liable for any loss or damage, direct or indirect, arising from the use of this information.
All views and opinions expressed are personal and do not reflect the official policy or position of any agency or organization. Past performance is not indicative of future results.
By using this website, you agree to the terms of this disclaimer.