Target & Reward-to-Risk
Logical targets: opposing zones
A target is not chosen by feel or a fixed rupee amount. It is placed at the NEXT opposing zone in the direction of the trade. For a demand long setup, the target is the nearest fresh supply zone above the entry. For a supply short, it is the nearest fresh demand zone below.
Minimum 2:1 ratio
If the distance from entry to target is less than 2× the distance from entry to stop, skip the setup. With a 2:1 ratio you need to be right only 34% of the time to break even. With 1:1 you need 50%. Lower ratios make a method very difficult to sustain through normal losing streaks.
Worked example
Entry at ₹125, stop at ₹120 = ₹5 risk. Nearest supply zone is at ₹135. Target at ₹135 = ₹10 reward. Ratio = 10 ÷ 5 = 2:1. This setup passes the ratio filter. If the supply zone were at ₹128, the reward is only ₹3 against ₹5 risk = 0.6:1 — skip this setup.
Clear path to target
Check whether there are other significant zones or levels between entry and target that might stall the move. If there are, the effective target is shorter and the ratio may drop below 2:1.
Practice checklist
- Find the next fresh opposing zone — that is your target
- Compute reward ÷ risk
- Minimum ratio required: 2:1
- Check for obstructions between entry and target — they shorten the effective reward
- Skip setups that cannot reach 2:1
Mistakes to avoid
- Setting targets at round numbers or by feel instead of at opposing zones
- Taking setups with 1:1 or worse ratios — the math works against you
- Ignoring intermediate zones that will likely stall the move