Hi all,
I have a question about reward:risk ratio.
The trading strategy which I'm very comfortable with has a very highh percentage of wins, easily above 85% of the trades are wins. I do have losses but they are few and far in between.
The thing that troubles me is the reward to risk ratio is less than one its about 0.65 well the expectancy still works out positive but the risk:reward thing troubles me a bit as everywhere else I see most people's trade systems were losses are small and the reward to risk ratio is well above 1 most times its like 3.
When I try to increase my ratio to 1 which I can, I get stopped out more often and the win to loss ratio drops. The trouble is I'm not psychologically comfy with a lower hit rate even if the reward to risk is well above 2 or 3. I prefer wider stops. Having a higher win rate sorta gives me a kind of mental satisfaction that I'm "right" in the market, so to speak. I know being right is not important and there is Soros's very old adage which says its not important how often you're right or wrong but what is important is how much you make when you're right and how little you loose when you're erong ..........but it is to me.
My question is will this style be viable in the long run as its against conventional wisdom and even goes against old maxims like let your winners run and cut your losses short.
Thanks for your help folks
I have a question about reward:risk ratio.
The trading strategy which I'm very comfortable with has a very highh percentage of wins, easily above 85% of the trades are wins. I do have losses but they are few and far in between.
The thing that troubles me is the reward to risk ratio is less than one its about 0.65 well the expectancy still works out positive but the risk:reward thing troubles me a bit as everywhere else I see most people's trade systems were losses are small and the reward to risk ratio is well above 1 most times its like 3.
When I try to increase my ratio to 1 which I can, I get stopped out more often and the win to loss ratio drops. The trouble is I'm not psychologically comfy with a lower hit rate even if the reward to risk is well above 2 or 3. I prefer wider stops. Having a higher win rate sorta gives me a kind of mental satisfaction that I'm "right" in the market, so to speak. I know being right is not important and there is Soros's very old adage which says its not important how often you're right or wrong but what is important is how much you make when you're right and how little you loose when you're erong ..........but it is to me.
My question is will this style be viable in the long run as its against conventional wisdom and even goes against old maxims like let your winners run and cut your losses short.
Thanks for your help folks