Anyone else use this type of trading strategy?

Trading Discussion
1

So i trade what I feel is different than most others. I use a 1:2.5-3 risk reward ratio. I usually risk 1.5-2% per a trade. So for example, a 1:2.5 it would be 2% risk and 5% reward. So i can lose 2 trades and still be in profit from 1 win.

I have around a 40-50% win rate, so out of 20 trades, with 40% its 8 win and 12 loss,

12x2%=24%
8x5% = 40%

leaving 16% return.

I mean it works for me, it takes a lot of mental training for the losses, because typically lose a little more than I win, but my wins are for far more than my losses. So seeing 3 trades lose back to back, sucks, but I trade emotionless so I plan my trade and trade my plan. Giving my emotions a back seat haha.

I feel proper money management and controlling emotions is 80% of trading, and the other 20% is analysis, technical only for me.

Just curios to hear if others trade like this, losing a few more trades than they win, but having a strong risk reward ratio to make up for it and stay profitable.

Have a good one!

1 Like
2

Sounds like you have a positive traders equation, thus:

(probability of win) X (reward) > (probability of loss) X (risk)

Generally, a risk/ reward of 1:2 will give you a positive traders equation. It sounds like you are sacrificing a bit of reward for a slightly higher probability. That’s not bad, as long as you can do that consistently. If you are going to do that, try to increase your hit rate to 55-60.% That’s possible if you are a good, disciplined analyst.

Best of luck on the charts.