How is this calculated?

Beginner Questions
1

Hi all !

On Nial Fuller’s website, I read this in an article:

“[B][U]with a reward of 3 times risk (3:1), how many trades can we lose out of a series of 25 and STILL make money? The answer is 18 trades or 72%[/U][/B]”

The question is how is he coming up with [B][U]18 trades[/U][/B] ? What the formula to calculate those losing trades ?

Thanks for your help.

2

An R:R of 3:1 means 1 win is equal to 3 losses. Create a ratio from that: 3/4 (3 losses out of 4 to be breakeven) = 75%. Multiply that through by 25 and you come up with 18.75, so 18 loses out of 25 would be better than breakeven.

3

Thanks for your reply Rhody.

May be I couldn’t post my question right. The reward is $300 and Risk is $100.

What he says (without showing how he calculated those 18 trades) then is this:

18 losing trades at $100 risk = -$1800, 7 winning trades with a 3 R (risk) reward = $2100. So, after 25 trades you would have made $300.

In your answer, you are assuming the risk to be $300 and reward $100. Can you please shed some light on this ?

Thanks for your help.

4

You’ve misunderstood my reply. I am not assuming $300 risk. What I said is that 3:1 reward:risk means you can lose 3 times in 4 and break-even -a 75% ratio. That means if you lose anything less than 75% of the time you come out ahead.