Sunday, July 22, 2012

Cognizant Technology Solutions (CTSH)

BUY signal the week of 10.24.11 at $75.67. My first stop was $55.98, so my risk (R)/share was $19.69. Stopped out the week of 5.7.12 at $61.29. The percentage loss on this trade was -19.0%, and the reward-to-risk ratio was -$14.38/$19.69 = -0.73.

Something I had not noticed until recently, although in retrospect it should be obvious, is that the reward-to-risk ratio on a single trade matches the impact of that trade on the overall portfolio. In this case, a trade with -19.0% loss and a -0.73 reward-to-risk ratio results in a -0.73% loss to the overall portfolio. Pretty simple.

History (beginning in 2003):
Winning Trades: 3 | 75.0% | +$22.69/share avg.
Losing Trades: 1 | 25.0% | -$14.38/share avg.
Average Trade: +82.9% | +$13.42/share | Reward-to-Risk (R): +3.03

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