This Week's Question: What's a Commonly Perceived Trading Mistake That You Personally Think Isn't One?

[S_Jane_M]

Trading with a reward-to-risk ratio less than 1.0 (stop-loss distance wider than target).

In the professional trading world, hedge-funds etc., it’s very common and normal, but in forums one often sees people saying they would “never” do it(!), and some even advising others to use an “R” of at least 1:2!!

Risk Reward Ratio

There’s always quite a bit of confusion,in forum conversations, between risk-to-reward and reward-to-risk. The “industry standard term”, for what it’s worth (if anything) is “risk-to-reward” so having the reward twice the size of the risk is normally stated as “1:2”. My own belief is that almost no retail CFD traders are steadily profitable with net reward greater than net risk. In forums, of course, everyone’s profitable, and they’re all trading with something like 1:2 (reward twice the size …