This topic came up in another thread and I thought it needed it’s own thread for a more in-depth look.
Myself being a bit old school have used the tried and true 2 to 1 ratio. For those not sure what this means, I am simply looking for a reward of 2 for every 1 risked. Your winning trade % must also play into this ratio. Someone who wins 75% of their trades can make money with a 0.5 to 1 ratio, while the person who only wins 25% of the time would need a 4 to 1 ratio just to break even. Is there a sweet spot for these ratio’s, is one better than another. I suppose it is going to come down to the individual and their trading style. Longer term traders like myself can look for those 4 to 1 ratios while the scalper or day trader might view that 0.5 to 1 ratio to good to pass up. One also must consider that the market is not like the stagnant conditions of a roulette wheel, as mark conditions change so will your win % and if your ratio does not change as well you could see missed opportunities or account draw downs .
Or are you of the mind set that this is all a bunch of mumbo jumbo that looks good in a book on trading that someone wants to sell you but has little use in the actual trading world.
I look forward to reading what I am sure will be very diverse responses