Mark, this is something I have often wondered about and I am wondering how you handle this.
I normally do set my stop lose and my TP based upon the chart. But if a trade to my FTA isn't going to give me at least close to 1:1 such as a .8 Return for 1 Risk, then I just pass on the trade.
What do you do in a situation where you see what you believe is an almost predictible move, but the Risk to Reward is 1:.5. Do you still take these trades, or do you just pass on them?
I am not overly fussed explicity by low %R, but I wouldnt take a trade that had a stupidly low %R, like 0.3R for example because it doesn't matter how good the setup, nothing is ever 100% and thus trading like this just isn't efficient over the long term....but trades like this are the exception to the norm because I know most of my setups produce 1R or greater so am I quite relaxed about taking the odd low %R winner.
One of the reasons I trade like I do and settled on the group of methods I did was because it is well suited to growing an account quickly with proper risk management with a high win rate...something that you don't commonly find with most trading methods.
I mean if you had a manual trading system that gave you 0.3-4R for example then yeah I'd never trade like this as it's not just efficient in any way and says to me either the system is more like a coin toss (i.e. there is no real edge with the entry) or b) the trader trades with fear and cuts their winners short for fear of taking a loss. Even if you had a system that gave you 90% win rate, just by the nature of trading you will go through periods of 3,4,5 losses in a row...and how many winners does that wipe out...I could never trade like this, especially when I know I don't need to. I still trade the same way I did when I was trading and growing my smaller account, I'm just more relaxed about when I trade and risk slightly less these days.
I'm always looking at ways of increasing my %R on a setup too...I ask myself the following - where has price got to go to prove to me on the balance of probabilities that my reasoning for entry is invalid - this is where my SL goes and its commonly not where most people would place their SL's because most people don't do this type of analysis and don't think about price in more detail etc.
So yeah %R IS important if you want to grow an account at a decent rate...and let's face it 99% of traders on public forums do...being able to trade with accuracy (i.e. a high win rate) whilst achieving decent %R is the most efficient way to grow an account quickly IMO and if you traded a system producing low %R on the majoority of trades you just wouldn't be able to turn a small account into a decent size, it would take years...(unless you used high risk per trade) and for me I don't see the point, hence why my journey ended up with the methods I now trade, cos they allowed me to achieve the desired account growth in about 1 year...and why would I change from this method just cos my account is bigger that would just be daft (or highlight that I can't dis-associate myself from the value of a trade etc which is just a psychological weakness).
Anyway ramble over, have a good weekend
