I'm trying to figure out how to calculate my risk/reward ratio of 2:1 (risking 2% of total account capital) through the use of Stop Loss/Take Profit prices per trade.
Say, my entry price is 292.64 and the recent swing low price is 291.25. I use the ATR (average true range) indicator of the entry candle value which is .42. I use this to subtract the swing low price like so:
291.25 - .42 = 290.83 is my Stop Loss Price with a risk ratio of 1.
Now, since I'm doing a 1:2 risk/reward ratio, I want to calculate the Take Profit price that would meet the reward ratio of 2.
On my chart (without calculation), the reward ratio of 2 for Take Profit price is 296.26.
I was wondering what is the formula as to how I manually calculate and arrive at that number (296.26) with the Entry Candle price of 292.64 and Stop Loss Price of 290.83 given?