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Rationale behind "Risk Per Trade" and "Risk/Reward Ratio"? 8 replies

How much Risk to Reward Ratio Should be used? 4 replies

Is a high risk reward ratio overrated? 12 replies

Good reward/risk ratio experiment 20 replies

Risk Reward Ratio and Account Risk 30 replies

Attachments: Risk Reward Ratio is not used for making money
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Risk Reward Ratio is not used for making money

Quoting charlyher
.
If you are hit with a Black Swan, you will lose 300 - 400 times
in a row. .
A Black Swan event is a 1 in 10,000 or more event. So why would I lose 300-400 times in a row ? You are clueless
300 - 400 loses in a row is quite feasible. With all the scalping and
automatic expert advisors out there, this is quite possible.
I guess you were not thinking......

Black Swan can really happen. Learn from Murphy's Law.
I am supporter of reality not simple math and statistic that can be
interpreted anyway you want it.
Quoting charlyher
I am supporter of reality not simple math and statistic that can be
interpreted anyway you want it.
Lulz.
charly, your parents must be black swans because you are an ugly duckling.

Seriously, telling a forex forum with thousands of members that they are all going to lose is falling on deaf ears, sir. Instead of wasting our time, write about it in your diary.
Quoting charlyher
Don't assume that I have been burned. Because I am not.
My intention here is to help the dumb. I am all knowing, how can I be
burned??? Of course, unless there was total chaos, meltdown, and
complete manipulation, then I might lose.


But, don't assume that I am burned because I am not. I am the
sun the shines everyday. I am the source. Therefore, I shine.

I am simply here to help the beginners, the difficulties they will face.
Yes, you really sound like a master of trading with your uber negative rap on the whole situation. Please why would anyone listen to you. You have completely destroyed your credibility with the above statement, and previous ones. Well done
It has it all: conspiracy theories, gambling voodoo, human incarnation of a god, and black birds. Never before have I met a broken trader, so this is an interesting experience.
Quoting Mr J
It has it all: conspiracy theories, gambling voodoo, human incarnation of a god, and black birds. Never before have I met a broken trader, so this is an interesting experience.
I actually found him very worthy, honestly. HE was an inspiration, he was so inspirational that I felt I had to add him to my ignore list. Its a shame really, there are plenty more out there just like him.

Razor
Quoting PrymeTyme
there are no winning strategies or tactics... a trader can be either right or wrong.. and has to act according to it..
Of course there are winning strategies or tactics otherwise no one would win. No offense intended but maybe you don't have one. That doesn't imply winning strategies or tactics do not exist. A trader is not "wrong" or "right" - they are either making or losing money. It is a simple metric that measure success or failure.
Back on topic...... Reward:Risk

Here is the view of Jimmy Young, who is apparently a "retired proven professional Bank FOREX trader with over 20 years of hands-on FOREX trading experience." Point #33 deals with R:R -

"33) Over-Relying on Risk Reward – There is zero advantage in risk reward; if you put a 20 point stop and a 60 point profit your chances are probably 3-1 that you will lose; actually with the spread its more like 4 to 1 (from entry point if it goes down 17 points you lose or up 63 you win; 17/63 is close to 4-1)."


It just goes to show: search long enough on a forex forum and you'll always find a view that contradicts the mainstream. That makes perfect sense to me. There are potentially a zillion different ways to approach trading. Nobody is necessarily "right" or "wrong":

 

  1. Nobody can say with absolute certainty that it's impossible to trade profitably until they've tested every one of the infinite number of possible strategies.

  1. Conversely, nobody can say with absolute certainty that the strategy that they're currently using won't break down at some future point. Markets are built on belief systems that create orderflow, and belief systems can change over time.

Those who are serious about in a career in forex must embrace the realities.

Quoting hanover
Back on topic...... Reward:Risk

Here is the view of Jimmy Young, who is apparently a "retired proven professional Bank FOREX trader with over 20 years of hands-on FOREX trading experience." Point #33 deals with R:R -
[indent][color=blue][i]"33) Over-Relying on Risk Reward – There is zero advantage in risk reward; if you put a 20 point stop and a 60 point profit your chances are probably 3-1 that you will lose; actually with the spread its more like 4 to 1 (from entry point...
Quoting hanover
Back on topic...... Reward:Risk

Here is the view of Jimmy Young, who is apparently a "retired proven professional Bank FOREX trader with over 20 years of hands-on FOREX trading experience." Point #33 deals with R:R -
[indent][color=blue][i]"33) Over-Relying on Risk Reward – There is zero advantage in risk reward; if you put a 20 point stop and a 60 point profit your chances are probably 3-1 that you will lose; actually with the spread its more like 4 to 1 (from entry point...

Hi Hanover,

Great post mate and thanks for putting the thread back on track...

I agree that the risk/reward depends on how you are trading and the odds ratio zeroes out the edge.

But the good thing with forex is that it trends so well, and catching these trends with a higher risk/reward ratio is just like adding to winners.

What I am saying is this, everyone agrees that it is easy to blow up your account because of fear, right?

But what if you swap that around totally where you fear to win but love to loose. You will actually make money, right?
If you can easily blow up your account, you can "easily" make money as well
Quoting Larseg
Hi Hanover,

Great post mate and thanks for putting the thread back on track...

I agree that the risk/reward depends on how you are trading and the odds ratio zeroes out the edge.

But the good thing with forex is that it trends so well, and catching these trends with a higher risk/reward ratio is just like adding to winners.

What I am saying is this, everyone agrees that it is easy to blow up your account because of fear, right?

But what if you swap that around totally where you fear to win but love to loose. You...
Hi Larseg

I am often curious as to why traders are so keen to use Risk:Reward ratios. The Risk is always a known number. (it is the size of the Stop Loss) but the Reward is always a relatively unknown number (it is where the market is "expected" to go by the trader).
So a trader gets some comfort from the fact that IF the trade goes as well as expected (and most traders are overly optimistic/ confident in their ability to pick the market direction) then their Risk Reward ratio is say 1:2.

However, if we assume that the average trader is only correct 50% of the time then his win rate halve and then his loss rate will double.

I just wonder why traders get fixated on huge analyses of Risk Reward ratios???

.
Quoting jacko
I just wonder why traders get fixated on huge analyses of Risk Reward ratios???
I think people find it attractive because in theory, getting 2:1 on what they think is a coinflip seems like a good bet. Many don't realise that by changing from 1:1 to 2:1, that situation is no longer a coinflip, if it was even a coinflip the first place. If applied randomly, it would just shift the winrate from about 50% to about 33% (I say 'about', because there are biases). I wouldn't bother with it - trade good strategies and the stats will work themselves out.
Quoting jacko
Hi Larseg

I am often curious as to why traders are so keen to use Risk:Reward ratios. The Risk is always a known number. (it is the size of the Stop Loss) but the Reward is always a relatively unknown number (it is where the market is "expected" to go by the trader).
So a trader gets some comfort from the fact that IF the trade goes as well as expected (and most traders are overly optimistic/ confident in their ability to pick the market direction) then their Risk Reward ratio is say 1:2.

However, if we assume that the average...

Hi Mate,

That's a very good question and I can only answer for myself and why I use a higher r/r. I know there are traders out there which are using all funky stuff and still makes money. Anyways, here it goes.

I solely believe I have no idea where the market is going. I am using indicators and candlestick tricks which is possible to backtest (without a single subjective thought from myself) then I insert these numbers into excel.

While tweaking the numbers in excel (SL/TP)... I always get a better result when risk is low and reward is high.

That's all I can say buddy.... It might be interesting to know that my avg. time of open trades are 5-7 hours...
Quoting Mr J
I wouldn't bother with it - trade good strategies and the stats will work themselves out.
Hi Mr J

That is the conclusion I came to many years ago too.... Rather than trying to "force" my trading to get a set result, I prefer to trade the best I can (and in a manner that is sustainable for the longer term) and just let the profits accumulate.


.
Quoting Larseg
Hi Mate,

That's a very good question and I can only answer for myself and why I use a higher r/r. ...
You are an optimist.... !!!!!!
Quoting jacko
You are an optimist.... !!!!!!

?
Quoting jacko
Hi Larseg



I just wonder why traders get fixated on huge analyses of Risk Reward ratios???

.
Hi Wayne

I'm confused by it too. I think so many people get caught up with it because many trading books, especially ebooks, tout the merits of it. So do brokers. Everyone's method will produce a different R:R. There is no one-size-fits-all. Grid traders, and yes there are successful ones, apply a R:R that would make most people sick. Inside bar traders use the opposite. Neither is wrong.

Trying to achieve a definite R:R is building a trading equation backwards. The reward is only a guess. Settling for a specific reward, and refusing to accept anything more or anything less is rather limiting.
All the traders have heard from the "gurus to be" that they must cut their losses short and let their winnings run. What does this mean? It means that they will have more losses than winnings and the only way they can profit is to win more than they lose, therefore the Reward must be bigger than the Risk.
Quoting Larseg
?
Hi Larseg

I am sorry..the problem with printed text is that you can't see my smile when I type.
Or did you mean that you had a higher Risk level therefore you are not an optimist?


PS If something is confusing because it can be interpreted in a nice way and a not nice way, then please be assured that I will have always meant it in a nice way
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