As a trader I always try to manage risk and reward ratio. What is the best risk reward ratio you think about ?
There isn’t a “best” one.
For every method with a real edge, the “best” R:R is the one that makes the most of the edge (“has the highest PF” or however you measure it).
There are methods that are profitable with a 1:1 ratio but lose money with higher ratios, and there are methods that are profitable with a 3:1 ratio, or higher, that lose money with lower ratios.
It all depends on what type of trading and method it is.
You find the answer from the method.
One of my most successful methods is only about 0.75 reward to 1.0 risk (it comes up often), another is nearly 4.0 reward to 1.0 risk (that one’s aimed at catching the beginnings of new trends, and has a lot of false starts and a few big winners, of course).
Given the huge difficulty of coming up with methods with a genuine edge, and the great ease (comparatively!) of backtesting them to investigate the ideal target/SL ratio for them, there’s no point at all in starting out “in abstract” with a defined R:R and then trying to find a method that fits it.
That would really be putting the cart before the horse!
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I know the follwing facts. Still, sometimes i make mistakes. I am learning through trial and errors
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We all are, honestly!
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I don’t set targets or TP orders so I can’t say what r:r I set out to achieve. My positions are trend-following and so the reward is as long as the trend survives, less the top slice when price pulls back to my trailed stops.
In October I achieved 1:5 on a long-term Dow long. Actually it was a series of 5 trades in parallel but the net result was 1:5: a single long over the same chart span would have achieved 1:3, the capital risk in ÂŁ was the same.
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I think will depending with our experience, some trader might possible to using risk reward ratio 1;1 but some another might will said better use risk reward ratio 1;1.5 or more, it will depending our persepecitive of view, using 1;1 risk reward ratio if get one loss and one winning trades still on zero loss profit, and using 1;1.5 or higher if one loss and one winning trades still will get profit even small
Depends on the price volatility of given asset, market sentiments in overall. Highly volatility markets tend to attract scalpers, while moving sideways is probably a good fit for medium or long term traders. In case for me I trade medium-volatile instruments with R/R ratio at 2:1 on 1H timeframe.
Hello. I think that good risk value is 1-2% per trade. But to keep this point you should keep your strategy (lot size not more than 0.2 per 1000usd), use stop-losses according to the rule - your stop loss should be stated on the sup/res levels and be equal to your % per trade. Also you should carefully watch on your psychology. The main rule is: do not trade immediately after losses. Take a break, be calm, and be patient.
Risk reward ratio also depends on your ability to find out entry. Some traders can predict the market for long term. Some are for shorter time. . You have to adjust your risk reward ratio your trading strategy.
1:150,000
and now I’mjust drivelling on becsuse I csn’y finish my post where I want to - hope that extra rubbish helps !
I don’t have a target r:r and as I aim ti let runners win by following trends once they are established, in theory there is no limit to the reward side of the equation for me.
However, I also pyramid winning trades as soon as they reach unrealised gain equal to the original capital risk. So this gives the potential at least for increasingly asymmetrical r:r ratios.
As a demonstration, suppose I buy at 5000 with a 100pt stop.If price goes steadily to 6000 and then falls back by 100pts I will be stopped out at 5900 for a r:r of 1:9.
1:9 is pretty good, netting me 900pts, but I aim to replicate the trade at 5100, 5200, 5300 and so on, all with a 100pt risk and always increasing the stop by 100pts when a new trade opens. Obviously, when price falls back to 5900, the 6000 long will be a loser, -100pts. The 5900 trade will break even, as its stop was increased to 5900 when 6000 was reached. But all the preceding trades will be winners. These will total 4400pts, giving a r:r of 1:44. I have never met another strategy with even a potential of r:r 1:44.
It is obviously unlikely a price trend would sustain long enough to generate 11 consecutive buy trades before price pulled back so much as to trigger the stops on all. But at least I give my trades that potential.
Yes I know that we traders are always in a finding of good risk management practices and we are always try to find out various risks reward ratios to track the probable risks of trading. One of the most common risks reward ratio is coefficient of variation. and i like this relative risks measure as it shows me how much risks I have to bear in order to earn $1.
To manage risk reward ratio, you also need good knowledge. The ability to find a good trade is important. You have to find out what you are best at. How many entries are right and wrong out of 10. Sometimes 1:1 risk reward can be good if your winning ratio is more than 50%. It’s actually a trial and error process. You have to find what’s best for you.
Managing risk is a great skill that always supportive to avoid unfortunate risk and losses but first of all you have to ensure a good experience in Forex , generally we newcomers fall a great risk when using high leverage and trade during news. and we can’t manage our risk due to lack of experience. We can use demo account where how works leverage and news trading can see completely.