Maximize Your Reward-To-Risk Strategy

Most traders are overly concerned about winning with every trade, rather than setting up clear reward-to-risk strategies that reward consistency.

It's similar to the story about the tortoise and the hare. Sure, it's great to win on every trade as your trading account would obviously balloon. But, sometimes, that desire to win on every trade clouds the ability to sell stocks that simply aren't working. I've always said that you should know your target and exit plan for every trade - before you place it! I think American Express (AXP) is a stock that sets up really well right now from a reward to risk approach:

Enter American Express Co. (AXP):

The first thing I see on this chart is that AXP continues to hang onto 20-day EMA support, which is why I like entry here (at least partial entry). I believe the most important short-term area of support is the gap support zone from 162.50 to 165.00. The horizontal line that I've drawn at 165.00 has proven to be very formidable price support and price resistance over the course of the last year. So my strategy would be to accumulate AXP as Wall Street appears to have done - based on the rapidly-increasing AD line. I like entry at the current price down to 165.00 with a closing stop at 162.50. My target levels would be price resistance from 176.00 to 181.00.

Happy Trading! Tom Bowley Chief Market Strategist EarningsBeats.com Better Timing. Better Trades.