Hi,
As the title states. Is 2:1 bad? 1:1? What is your average ratio when opening a trade?
Thank you
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I think its not something to get fixated on, the aim of the game is profit not good statistics.
Being able to set a r:r in advance in this way implies that you know in advance both the risk, and that is important, but also the reward - this means there must be a price which you already have in mind at which you will exit the trade. Many traders us support or resistance to identify exit points, either as price levels or dynamically using Fibonacci or MA’s etc.
But the guidance to let a winning trade run is good. Even better is to pyramid it. Also good is not to wait for your TP to be hit if the TA after entry deteriorates so you need to exit with profit early. These sorts of tactics make profit but completely screw up your r:r calculation - you just have to decide which is more important.
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What @Tommor said, but just to add a thought - R:R will vary from trader to trader, as we all use different strategies. I trade a lot of EOD, and when placing the trade I will look for a technical reason to believe there is room for 1:1 minimum, but will very often have trades run beyond that. If the market is looking a little choppy, or if there’s some news coming, or if I don’t want to overexpose, then I will often dive in, grab 1% and get out again, even if I think it could run longer. EUR/USD last month was a good example of when I might do that.
But I have had some trader buddies who trade of a 5 minute chart who place a trade at 2:1, hold the trade for 15 minutes or so then get out. Their win rate is such that it works for them. Take 1% in a morning, three or four mornings a week, you’ll easily hit 5-10% a month just from that. So there is no universal R:R answer, as long as you always have a reason for doing what you are doing.
Just don’t bend the chart to make your R:R dreams fit! You wouldn’t be the first…
ST
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Thank you everyone, I’m usually at 1:1 through 3:1 or so but saw some traders at like 17:1 so I didn’t know for sure.
I’m not a great fan of Risk:Reward and prefer to let the market tell me when to get out. If its too early I might look for another way it. Don’t get fixated on it though.
Most of us who trade profitably will add into the mix that you don’t have to take every set-up that you ‘see’. To be honest each trade that you intend to make should already have marked out the total risk and the potential reward that you’re aiming for should everything work out for the best. It’s not uncommon to push some opportunities to the side if the payout isn’t worth the time - or to more specific if the payout over the long run won’t result in positive expectancy. As a rule of thumb, in my view, I’d not be looking to take a position should the payout be any less than double that of your risk; 1:2 risk to reward.
The like of 1:10 or greater are nice to achieve, but the more you increase the potential gain the less number of times that it will be achieved, they are indirectly related per se.
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How one can say definately 1:2 risk reward will come true . It means you risk one and expect 2 . It does not happens in trading until you had full potential of market analysis grip on trading and skill of risk management. Minimum risk you can use is up tp trader how small lot he is offering for trading and what leverage you can use minimum for trading then your less risk taking will determined by you.
Yes, and you should know your entry and exit prior to entering the trade - unless you like to enter a trade and adapt in real time. The minority are the latter in the case?
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Of course no one can say that anything will definitely come true. It is more a case of establishing that there is no obvious reason why Price has no room to run into profit before entering a trade in the first place. If there is a major level coming into play before Price can give me at least 1:1 then I won’t take that trade. Doesn’t mean that I now what is going to happen, I am just trading defensively.
Yes absolutely, I will often scale out of a position. People tend to get hung up on finding the ‘perfect’ setup, but a vital part of that is checking that there is room for the trade to play out. I have seen people take what they claim is a perfect short position as the setup looks textbook, but they are only just above a major Support level and it simply isn’t likely to give them what they want.
While the odd EOD trade can give a crazy high R:R, I’m not sure that many traders go in planning such a great return. I sometimes think that a setup has given me room to hope for 1:3 or better but if it runs to 12 I’ll take it but not claim I planned it!
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Yes absolutely. The only time I don’t set a fixed TP is when I am planning to scale my SL behind Price, which I might do for EOD trades, give it time to sort itself out initially and then simply trail behind the Daily bars as they close.
If a trader hasn’t planned the close of their trade, or at least thought about it, then they’re only doing half the job.
I could teach my kids to spot a technical setup much more easily than I could teach them how and when to exit profitably. That’s where all the nuance is!
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I use a 2:1 as a minimum.
If your trading strategy provides good success ratio then you can go with 1:1. Otherwise, it’s difficult with this ratio.
2:1 and 50% win rate.
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In my case I am using at least 3:1 and sometimes 2:1 but rarely.
3:1 gives at least some profit in average number of whole amount of trades I take. Goal is to be successful in trading so I need to have ratio that will give me profit at the end.
Ratio 3:1 is minimum I like to have and sometimes in my trading R:R is larger because trading strategy allows me to have. While I am trading on larger time frame I like to have good profit so even though I could use larger R:R than 3:1 I use smaller R:R with higher lot size.
This is something everyone should incorporate in their trading strategy. You should have money management strategy and you should follow it.
So, R:R is relative and no one should base their learning about R:R by looking what someone else have. You should read and see what others say but always take that information and check your strategy can you take something from it.
Same to me; basically this percentage depends on the strength of any rend. So, it varies.
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There are strategies in forex where you can make money only on risk reward ratio.
The Proper risk:reward ratio clearly depends on your strategy. If your strategy has good winning probability, you can even go for 1:1 ratio.
I use keylevel breakouts strategies for risk reward ratio.
The probability of my strategy is 60 to 65% atleast. Based on this I decide the strategy.
You can check the full research on The Plan how to make money in forex using Risk reward ratio with any strategy.
That is a very good way to go about it. Keeping the risk reward ratio to 1:1 is quite fair and safe.
Quite an insightful article and I like how it is divided into three basic steps. I agree with the fact that there has to be some balance between the risk reward ratio and the strategy you’re using. A lot depends on that.
Yes, I prefer calculating the profits at the end of the month which helps me get a decent idea of where I stand. This is also useful for further planning and setting up the ratio. Do you mind sharing the strategies you’ve been using? Thanks.
Now that depends on the trade. For example, I recently tried to set up my risk reward in a way that the possibility of making profits was higher. For strategies, I’ve used price action and day trading with some low spread brokers, IG, Fxview, etc. I am also experimenting with different stop loss placements nowadays.