What is your average (or expected) return on RISK?

Beginner Questions
1

I made a thread sometime earlier which was confusing, so I’ll hopefully get some clearer answers this time round. :slight_smile:

What’s your average or expected return on risk, where risk = the size of your stop loss? When I backtest, I consider a strategy viable if it provides an average return on risk in excess of 15% at reward-to-risk ratio of 2-to-1. I don’t like using extreme reward-to-risk ratios beyond 3:1 or 0.5:1.

With a reward-to-risk ratio of 2:1, is a return on risk of 15%-25% good? What are your results or thoughts?

2

im still not to sure what you asking :slight_smile:

but, ill tell you waht I do as i think it may answer your question to some degree.

All my trades are geared up to a risk:reward ratio of 1:2
So if I risk $400 then im aiming for a profit target of $800.

When you say return of 15%-25% i assume your talking per trading month. And the answer to your question is based on what percent of your account you are risking per trade.

Rather look at this answer in terms of ‘r’, where ‘r’ is your return as a multiple of the percentage of your account risked.
so, i hit on average a monthly ‘r’ of 20

If im risking 1% per trade, then im making (20 x 1%) = 20% per month
If im risking 4% per trade, then im making (20 x 4%) = 80% per month

and so on…

3

my average is about 3R

4

I’m not sure what’s hard to understand about the question. :frowning:

You risk money per trade. What is your average profit, percentage-wise, from that risk?

If I risk $100 per trade and walk away with $120 [I]on average[/I], then my return on risk is 20%. This may represent a possible scenario where I trade risk:reward of 1:2 with a win% of 40%.

5

A BAJILLION FUL FILLION MA MILLION ZA ZILLION SA SILLIAN… dollars.

Or in english
Close to 2-3:1

6

^Seroius, Tansen? On average, you triple up every time you open a trade?

7

That doesn’t mean one wins every trade.

Having a good R/R is only part of it. You could have a 1:3 R/R, but still not be profitable, because the system only wins one out of 4 trades.

Expectancy over a decent rate of time will give you a better feel for how a system will hold up over the long haul.

8

Yes and no.

Clark taught me the things I need to look for in order to try and find the 100 pip runs or close to but for the most part when im scalping my short term swing I try to aim for 2:1 and it usually comes up like 4-5 pips short but Im rounding up a bit.

In a larger sense I let the winners run and from time to time it may hit 3:1