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Money management in reality

  • #21
  • Apr 4, 2014 7:55am Apr 4, 2014 7:55am
Quoting SM02
{quote} With MM, the 2 important numbers are: 1) % win rate and 2) Reward:Risk ratio (RRR) If you “let profits run”, you’ll have a high RRR, but a low win rate e.g. a swing trade strategy. Conversly, if you “take profits early”, you’ll have a high win rate, but a poor RRR e.g. a scalper type strategy. Both can be profitable, if the strategy and execution are of good quality. Given that you already have a strategy, you should be able to define the RRR and win rate. Sounds like you’re more of a swing trader, and so I assume your RRR is something like...
Nice post, Depending on your entry method you can of course trade both approaches at the same time very successfully.
tradewith60
  • #22
  • Mar 3, 2021 6:49am Mar 3, 2021 6:49am
This thread is EXACTLY what I'm looking for! Is this thread still active? Currently trying to get my head around the whole TP1, TP2, TP3 concept Vs a consistant R:R of 1:2. The latter still seems to make better sense to me. Statistically, am I correct?
Emotional Control. Process, not outcome.
  • #23
  • Last Post: Mar 3, 2021 8:04pm Mar 3, 2021 8:04pm
Hello,

In my opinion, trade management must be in line with your trading strategy. Specifically, the risk reward aspect of it.
At the very least, my strategy does not offer an entry signal unless there is at least a 1/5 risk : reward.
I'll explain in pip counts just to make it simple. 1/5 risk:reward means 20 pip sl / 100 pip target.

With this risk ratio in mind, a trader can begin to extend portions of their position, without the common issue of stop
losses being hit and profits lost.

I think it's wise to build your strategy with its main goal to always minimize stop losses. Because winning big has no
meaning if the strategy also loses big.

Hope this helps!

Ken
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