A signal card looks busy, but it is built from four prices: entry, stop, first target and second target. Once you can read those, you can read any signal.
A Worked Example (Short Trade)
Imagine a sell (short) signal on a coin trading at 100.00.
| Part | Price | What it means |
|---|---|---|
| Entry | 100.00 | Where the plan starts. |
| Stop | 105.00 | If price rises to here the idea is wrong. Risk is 5.00 per unit. |
| TP1 | 92.50 | 7.50 below entry, which is 1.5 times the risk (1.5R). |
| TP2 | 62.50 | 37.50 below entry, which is 7.5 times the risk (7.5R). |
The distance from entry to stop (5.00) is your risk, called 1R. Everything else is measured against it. TP1 pays 1.5R. TP2 pays 7.5R.
Reading the Parts of a Signal Card
- →Direction: long or short.
- →Entry: the price to enter at.
- →Stop: the loss point, sometimes shown as a percentage risk.
- →Targets: TP1 and TP2, often with the R-multiple and the percentage move.
- →Status: whether the signal is waiting, in play, or closed at a target or stop.
What Happens at Each Outcome
| Outcome | Result |
|---|---|
| Stopped out | You lose 1R, the amount you planned to risk. |
| TP1 reached | You make about 1.5R on the part you close there. |
| TP2 reached | You make about 7.5R on the part you held. |
Check the plan, not the excitement
Read all four prices before acting. If a signal shows an entry but no stop, you do not have a plan.
Common Mistakes When Reading Signals
- →Entering without placing the stop.
- →Sizing the position by feel instead of by stop distance.
- →Treating TP2 as a promise rather than a target.
- →Moving the stop wider when price goes against you.
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Try The Secret Vault FreeWhat is R in trading signals?
R is your risk on the trade, the distance from entry to stop. A 1.5R target pays one and a half times what you risked.