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The 2/1 risk/reward MYTH...

  • #41
  • Mar 5, 2007 7:51am Mar 5, 2007 7:51am
terminator,

what you are talking about is profitability...thats a prerequisite...as a retail trader, your "edge" is just that you dont have to be in the markets at all times...that is what allows you to extract some money
  • #42
  • Mar 5, 2007 1:02pm Mar 5, 2007 1:02pm
Quoting peter100
terminator,

what you are talking about is profitability...thats a prerequisite...as a retail trader, your "edge" is just that you dont have to be in the markets at all times...that is what allows you to extract some money
Being in the (forex) market all the time or not has nothing to do with profit and edge Peter.

Trend following systems using 2 simple moving averages for example are in the market all the time AND are profitable at the same time, even though they do generate big drawdowns.
  • #43
  • Mar 5, 2007 1:06pm Mar 5, 2007 1:06pm
Quoting FXTerminator
Being in the (forex) market all the time or not has nothing to do with profit and edge Peter.
This is a huge advantage and does give retail traders an edge to those that always have to display a bid/ask. Although, I'm not sure how much it really cancels out the many disadvantages that we have.
  • #44
  • Mar 6, 2007 3:54am Mar 6, 2007 3:54am
Hey FXTerminator

I have been away for a while, so I am seeing this thread only now, but would like to give my 2p since I feel strongly about it.

For me personally, achieving a 2:1 reward/risk ratio is THE key to profitability.

During Q3 06 I tested a method that I started trading live this year. Over 100+ trades during testing I had a very nice 67% of successful trades, but now since 2 Jan 07 and 80+ trades I only managed 51% (although I hope this will creep up to 60% over time). So by having an average winner of 51 pips versus average loser of 24 pips, I have generated 600+ pips per month during January and February.
Consistency and patience is everything
  • #45
  • Last Post: Mar 6, 2007 6:49am Mar 6, 2007 6:49am
Geld,

I don't think having a 2:1 RR is "the key" for you. I think having a system that manages a 51% win ratio is the key, and your profit happens to be dependent on your RR...

Trust me, if your system goes down to a 20% win ratio (do the math)...you WON'T be profitable...so it's not your RR...it's your statistical edge.

Quoting Geldmeister
Hey FXTerminator

I have been away for a while, so I am seeing this thread only now, but would like to give my 2p since I feel strongly about it.

For me personally, achieving a 2:1 reward/risk ratio is THE key to profitability.

During Q3 06 I tested a method that I started trading live this year. Over 100+ trades during testing I had a very nice 67% of successful trades, but now since 2 Jan 07 and 80+ trades I only managed 51% (although I hope this will creep up to 60% over time). So by having an average winner of 51 pips versus average loser of 24 pips, I have generated 600+ pips per month during January and February.
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