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What's your TP? Fixed reward vs dynamic reward 5 replies

Rationale behind "Risk Per Trade" and "Risk/Reward Ratio"? 8 replies

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Risk Reward Ratio and Account Risk 30 replies

Attachments: 1:1 Risk/Reward Frowned Upon?
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1:1 Risk/Reward Frowned Upon?

1:1 ratio is very good. psychologically best for those trader who always want to exit in small profit.
For Risk Reward Ratio is the agreed nomenclature 1:3 ? Risking 1 to make 3.
How are you guys getting 3:1 and still being consistently profitable with >=25% win rate?

I jest, however you make money good for you. 75% of traders don't.
Quoting NevFX
For Risk Reward Ratio is the agreed nomenclature 1:3 ? Risking 1 to make 3. How are you guys getting 3:1 and still being consistently profitable with >=25% win rate? ~~
I think he was talking about odds. Odds of 3:1 means you have 3 chances of loosing and 1 chance of winning.
So 4 chances altogether, with 1 chance of winning ie 25%.
Good Trading
Personally, I believe 1:1 is the best R:R. Look at it this way, betting a win in a soccer match is 33% But the odds of one betting ANY soccer game to have both sides corner kicks is above 95%, that's why the rewards on it is minimum, thus In trading, if you play the most obvious odds, you will when more. For you to understand more, rather back test it on 15 and above on especially EU. You will see that you can when 9 out of 10. The secret is not on RR but on Risk. HOW MUCH DO YOU RISK ON A SINGLE TRADE. If you have a 1000 dollar account and you risk 10% to get 100, it's OK now imagine with 100k account with a probability of 80%.

Now imagine 1:0,5

There is a mathematician who passes RR of 1:0,1... He has never lost. The bigger the account the bigger the 0,1.

The way you can earn more is to risk the obvious daily.
Hey all,

They only thing you can control with a good amount of certainty is risk. You can pretend to have a goal but you get what the market gives. Depending on the trading strategy and money management scheme you developed, setting TP or using TS can be a goal. However, using a static RR number or % does not make any sense to me. However, this is one of the biggest discussions in trading, where to get out.

- Ric
Be humble or get humbled
  • Post #66
  • Quote
  • Edited 8:09am Jul 30, 2021 6:45am | Edited 8:09am
I get what everyone's saying and it makes sense,
But what if I place my stop at an appropriate place (a place where my strategy is invalidated, the definition of where to place a stop) but then to make my RR 1:2 I have to place TP at a completely inappropriate place where I don't think price will reach?
Do I place my TP at an unrealistic place to make my RR 1:2?
OR
Do I put my TP at a reasonable place I think price will reach? but this would make my RR lower then 1:2
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For example I would rather put my TP at 0.8520 instead but then the RR would not be 1:2

Any guidance?
You miss 100% of the shots you don't take
Quoting ccrkk10
Hello all. It seems that the trading community as a whole is widely against using a 1:1 risk/reward ratio and constantly preaches to aim for at least a 2:1 ratio whether it be on forums, youtube videos, chat rooms etc. I recently started thinking why is this the case? I personally come from a blackjack card counting background. At the very best counters will get a 3% edge over the casino (win about 53% of the time). Sports bettors are considered amazing if they can hit at a 55% rate and are legendary if they can get 60%. There are plenty of people...
Hi ccrkk10!

You have raised very interesting questions and your doubts are justified.
The answer is that 99% are not traders. They hear/read fairy tales and repeat them like parrots. Fixed RR cannot and will not work because markets doesn't care what you dream about.

If you check FF there are no traders with less than 85% winrate. They earn 5-6% daily and can open >100 lot size positions. So why not to believe in risk-reward ratio?
Observer effect
Quoting NevFX
For Risk Reward Ratio is the agreed nomenclature 1:3 ? Risking 1 to make 3. How are you guys getting 3:1 and still being consistently profitable with >=25% win rate? I jest, however you make money good for you. 75% of traders don't.
Exactly. There is so much bad math in this thead. Running 50% win rate on a 1:3 (25% expected), you'll rule the world in a couple years.
The higher the R-multiple above 1, the more inconsistent the distribution of losses will be. A 1:5 R:R has only 10% expected win rate. Greater are the chance of running in to 20 losing trades in a row before your 5th win.
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Quoting Winston Reed
Risk to Reward is the key to a winning trading strategy. If you are not employing a R:R strategy and you are unprofitable then this is why. 1:1 overall average R:R requires >50% win rate to be profitable.
There's so much incorrect info in here. A 1:1 will always be profitable at >50%. Your 1:3 R:R requires you to win 25% of the trades just to breakeven.. when the expected win rate is only 17%. It's impossible to win 50% of trades with a 1:3 Risk:Reward. Same example in this babypips article: https://www.babypips.com/learn/forex...-to-risk-ratio Never tells the expectancy of a 1:3 being 17%..
EurUsd Trading Price Return This Year: 72.6%
  • Post #70
  • Quote
  • Edited 12:48pm Jun 15, 2023 12:16pm | Edited 12:48pm
To clarify for new traders:

a 1:0.5 R:R has 75% win expectancy. You need to win 67% of the time to breakeven.
a 1:0.9 R:R has 55.5% win expectancy. You need to win 52.6% to breakeven.
a 1:1 R:R has 50% win expectancy. You need to win 50% to breakeven.
a 1:2 R:R is twice has difficult to win, has a 25% win expectancy. You need to win 33% to breakeven.
A 1:3 is 3 times as hard as the 1:1, has a 17% win expectancy. You need to win 25% to breakeven.
A 1:5 is 5 times harder than the 1:1, it has 10% win expectancy, need 17% wins to breakeven.
EurUsd Trading Price Return This Year: 72.6%
I wonder why it’s so popular to pursue small short-term profits when the markets offer many opportunities to gain much larger profits with patience.
Open to new approaches.
Quoting MetaCoder
I wonder why it’s so popular to pursue small short-term profits when the markets offer many opportunities to gain much larger profits with patience.
Because the markets have been so yo-yoing price action, and now that trends have emerged, hindsight is activated, e.g. if I only went long there for the YEN pairs

If you trade like me, you'll be homeless and broke within a week.
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Trend-following can be frustrating because market action goes through sideways periods.
Open to new approaches.
Quoting MetaCoder
I wonder why it’s so popular to pursue small short-term profits when the markets offer many opportunities to gain much larger profits with patience.
More profits more often. Higher the R-multiple, the exponentially longer time spent in trade. A 1:1 will be 4x shorter on average than a 1:4, making more profits with less risk and variation.
EurUsd Trading Price Return This Year: 72.6%
Personally, I use 1:2 Loss to Win Ratio. SL could be either 1% or 2% and TP is always double of SL.
Don't focus so much on profits, focus more on losses. SL being 1% per trade and TP 2% is more than fine. If you have a good system that will be right 5/10 times or more will grow your account pretty convincingly. We are talking about 10% of gain on overall account after only 10 trades. Hey, it's only 10 trades! How many trades will you make in a year? Patience and consistency is what will make your account grow, not wild bets and insane SL and TP targets.
Quoting TheWraith
Don't focus so much on profits, focus more on losses. SL being 1% per trade and TP 2% is more than fine. If you have a good system that will be right 5/10 times or more will grow your account pretty convincingly. We are talking about 10% of gain on overall account after only 10 trades. Hey, it's only 10 trades! How many trades will you make in a year? Patience and consistency is what will make your account grow, not wild bets and insane SL and TP targets.
To risk:reward 1:2 and still have more than 50% win rate is extremely hard to do. Out of top 10 live accounts this year on FF, with more than 10 trades, only 1 has a 1:2 R:R and more than 50% win-rate: https://www.forexfactory.com/kauzen#acct.88-tab.report
EurUsd Trading Price Return This Year: 72.6%
Quoting Ryan420
{quote} To risk:reward 1:2 and still have more than 50% win rate is extremely hard to do. Out of top 10 live accounts this year on FF, with more than 10 trades, only 1 has a 1:2 R:R and more than 50% win-rate: https://www.forexfactory.com/kauzen#acct.88-tab.report

Indeed. I am trying and failing while trying. I have confidence in the system I use though. Look, after 100 trades if I am not profitable I will give up. If I can manage to have 4/10 profitable trades consistently or more then I will be more than fine.
Quoting Ryan420
{quote} Exactly. There is so much bad math in this thead. Running 50% win rate on a 1:3 (25% expected), you'll rule the world in a couple years. The higher the R-multiple above 1, the more inconsistent the distribution of losses will be. A 1:5 R:R has only 10% expected win rate. Greater are the chance of running in to 20 losing trades in a row before your 5th win.
It would appear that you are ‘t taking into account several factors such as their “EXPECTED R:R” compared to their “REAL R:R”. You also aren ‘t taking into account risk management. Maybe the person has a setup where they can win 3% of all their trades and still have an overall net profit.
Threesome Daddy
Quoting SingaRich
{quote} It would appear that you are ‘t taking into account several factors such as their “EXPECTED R:R” compared to their “REAL R:R”. You also aren ‘t taking into account risk management. Maybe the person has a setup where they can win 3% of all their trades and still have an overall net profit.
Can I see that trader's statistics? How would one profit from losing 97% of their trades?
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