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In video 34A on slide 13 Al says that a reasonable minimal reward is always 2x actual risk. He also says that if the actual risk is too small a lot of traders will go for a reward that is 2x initial risk.
My question is: What is "too small" actual risk?
Is it less than 10% from entry to initial stop loss? Is it 20%? Or is it a fixed amount of ticks/ points, like the minimal scalp size?
It is not 10% from the entry, it's not 20%. It is more so a fixed amount of ticks than the percentage from the entry. The price quickly moves a few ticks before reversing movement a lot of the time. It's better to have a minimum risk of more than a few ticks. "Too small" actual risk to some traders is the risk such that the low of the candle is not reached before the stop-loss is reached. Different traders have different definitions. The best definition is the minimal scalp size, I think.
Too small actual risk is actual risk that is less than the average scalp size for the given day. Or actual risk that is a lot less than what you are risking.
For example, if your entry bar is 4 pts tall and your actual risk is 1 pt. Then that is too small, since 2x AR is 2pts, which is a lot less than your Initial Risk.
