Profit vs. Risk

While we are waiting as the market pauses for lunch and in anticipation of the Fed rate announcement and statement, let me poise a question for debate.

Which is more important to you in your trade decisions, potential risk or possible profit, and why?

Hi,

One dictates the other. And while that holds true, the profits can always only be an estimate or assumption (since no trader ever knows whether a profit will materialize), while your risk on the other hand can be calculated down to the penny - and ultimately weighed up against 'a possible' profit.

regards
daytrading

Id say Its much more healthy to Initially look at the Risk first, but overall both are just as important as they both contribute equally to trading success.

After reading posts on the subject I have come to the conclusion that a High hit-rate Is much more benefitial than a high Reward to risk. The point that I am aiming for Is being able to risk 10% or so per trade by knowing that my edge can(and will) deliver a very high hit rate.

Don't forget that your risk/reward ratio automatically changes on the basis of your win/loss ratio.

It's only a different approach to have more winners (although of smaller magnitude) which make up for the odd bigger loser (which inevitably happens) compared to the approach where the trader loses 8 out of 10 times but the 2 winning trades outperform the losers.

You still have to put the risk in each approach into the perspective of the 'possible' winners.

regards
daytrading