BackStory: I trade price action on the four hour charts (morning stars, pin bars etc.), i currently use a risk reward of 1:2. I set my stop loss at 40 pips and my take profits at 80 pips. I typically make 200-300 pips a day using these settings, however on most of my trades i notice that if i would’ve used a risk reward of 1:3 or even 1:2.5 i wouldve bagged extra pips.
Question: does anyone here use a 1:3 risk reward consistently and see safe gains? i would hate to put my take profits too far too be hit.
Also, does anyone change risk reward ratios depending on the trades? how do you decide the strength of the trade?
this is my first post, babypips has single handedly changed my life, i was able to quit my job because of babypips lessons and trade full time very comfortably thanks in advance for replies
As for the R/R ratios, that would be something to backtest and see. I tested a 1 hour divergence strategy with 1:1, 1:2 and 1:3 ratios. For this particular strategy, the 1:2 test worked best, so that is what I use.
Yours will probably be different. Who knows, 1:4 may be the magic number…good luck.
first of all: 200 to 300 pips a day? holy smoke!! would you mind telling us a little about your strategy?
regarding your question: i set my sl and tp depending on support and resitance levels and i also consider the average true range (ATR). but after all, you make 200-300 pips a day, why the f*** are you comlaining?
I trade price action using 4H charts so your thread caught my eye. When you said you make 200-300 pips a day thats when I know you talking BEEEEEEEEEEEP.
I’m not sure why you guys are so critical about how much i make but i do make in that range regularly, its not that hard when you do the numbers and really think about it - First of all as for my system: I came to realize that price action patterns are nothing more than these three things
A current trend in place
A candle signifying indecision or possible trend change (doji’s, pin bars, hammers etc.)
Confirmation of the change in trend (ie. if the first candle in the pattern is bullish, then the next candle would have to be an indecision candle, and then the last candle would have to be a bearish candle)
Those things alone open up a range of new trades to be entered other then the rigid price action patterns alone, I then combine those with a filter like the RSI or ADX to see if the move is valid.
In addition to those patterns i trade i use Philip Nels 4 hour MACD strategy in confluence with this one, I use it on all of my charts and if you start using it as well you will see that it has entries on ALL price action signals we wouldve entered on and more
the 4 hour MACD strategy produces more results then just price action trading alone, and as for take profits and RR i go by each specific pair to determine that, each pair typically produces around 3-5 PERFECT trades a week, and i use ten charts so… it really isnt that difficult as long as you trade like a stone faced robot
as long as you wait for all the signals to be perfect and focus on quality trading rather than quantity, you’ll be good i used to trade on the 15 minutes from 3-12 EST i was like a living zombie all day every day, it wasnt working out…
I’ve tried using multiple indicators to set my risk reward (ie. if two indicators agree i set it at 1:2, if three indicators agree i set it at 1:3) but thats always just missed the target, and ive tried fibonnaci, in fact i almost entirely used that for a while, but my RR wouldn’t always be in tact that way, if anyone has any ideas on how to measure the potential of a trade that would be great
well, of course MA’s pull the price towards them, that’s because they are calculated out of the price you need to keep in mind that the MA itself is moving. it would only make sense, if you you use a reeeeeeeeeal long MA, so it almost does not move at all
EDIT: my opinion
The essential skills that traders need to master, are primarily filtered through each trader’s unique thought process, to the data on their own charts. So, a better way to phrase the question, would be:[B] “How can I view my charts and learn to ID reliable Take-Profit MA levels that are a match with my technical strategies, timing-windows and trading style?”[/B]
The answer is that each trader must gather evidence, systematically (like a scientist), and find multiple, completed moves that meet all the trader’s criteria for smooth reversals. Then, in addition to the system’s reversal indicators, add long-term MAs ( 50\100\200\300 – and Fib numbers like 55\89\144\233\377). Also look at how the various MA Methods (Simple\Exponential\Smoothed\Linear Weighted) consistently signal safe Take Profit levels, in advance. Then, follow the same process with the ‘Apply to’ selection area (O\H\L\C, Median Price, Typical Price, Weighted Close). Finally, after identifying the fewest number of MAs that show you enough trades with reliable (and sufficient) Take Profit levels; put them in your template with other indicators. It’s also possible to set up a template for impending reversal views. [B]This is a lot of work, but once finished, you will be sufficiently confident in your Take Profit levels, to stay in\exit trades at optimal times with no emotional jitters.[/B] While my own learning-curve - to figure out how to ID\sort indicators\settings - took years; by using this kind of approach, yours can be completed in weeks…
here is a pic i whipped up in a few minutes, ill maybe put up my system in detail in the forex system section of the forum this weekend
basically, i use my favorite price action patterns on the 4 hour charts (pin bars, evening/morning stars), every time i see one of these on the chart i zoom into the 1 hour to see what the price is looking like, if i see the price bouncing off the EMA’s or bollinger bands in the way i want, then i enter, i actually prefer this as of late to using indicators just so i can have a clean chart
(also, i only buy if the signal is in the lower half of the bollinger band, i only sell if its in the top half, this lets me know if its at the end or beginning of its range, so im not selling at the bottom of the range on a pin bar or something)
oh yeah aha, the first picture is just of this week so far (04/22 - 04/26 at 4PM EST) and all the trades ive made, its of the GBP/JPY 4 hour chart (my favorite chart :D), i put the potential amount of pips made but personally this week ive made ON THIS CHART ALONE 213 pips
i included the second picture (which is a picture of the GBP/JPY 4 hour chart of the past 6 weeks) to show the potential of this method, and as you can see from the past 6 weeks just from this chart alone anyone trading this system could’ve easily bagged 2,000+ pips, some might say that that was because there were perfect market conditions which is uncharacteristic, but actually those were just normal market conditions, THIS WEEK HOWEVER has been a crappy week so far, yet still there were pips to be made
SJ, sounds similar to what I’ve been getting into. I recently switched to the 4H charts, using a separate set of Daily charts for drawing SR lines and TLs. Over last weekend I got into the Nial Fuller idea of just trading off a handful of the highest-probability PA patterns (pin bars, inside bars in uptrends, hikkake, RR tracks/2-bar reversals off SR lines, etc). It sounds not unlike what you are doing, however it seems you’re further along than I am, as your trades have certainly been better than mine this week!
I’d be interested in joining your strat thread and encourage you to get it started this weekend. I’ll share whatever I might have that would be of interest.
ill start up a thread tomorrow with my strategy, ill put the link to it here and i’ve seen every one of Nial Fuller’s videos, they are extremely awesome, i find the highest probability pin bars are the ones in his fakey setup
thanks in advance for replies
but i do make in that range regularly, its not that hard when you do the numbers and really think about it - First of all as for my system: I came to realize that price action patterns are nothing more than these three things
i used to trade on the 15 minutes from 3-12 EST 
i was like a living zombie all day every day, it wasnt working out…
