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Risk Reward Ratio is not used for making money

  • #81
  • Nov 16, 2009 3:00am Nov 16, 2009 3:00am
Quoting billflet
Hi Wayne

I'm confused by it too.

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.
Exactly.... I agree . Like I said previously, 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.
  • #82
  • Nov 16, 2009 7:36am Nov 16, 2009 7:36am
Quoting billflet
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.
Reward isn't necessarily a guess - if you exit using a target profit, then it is reasonably accurate. I just don't think it's the right way to go about it though. Like you say, it's focusing on the wrong thing. I can't think of a better analogy, but it's like focusing on the symptom rather than the underlying cause. If we just apply good strategies, profit will follow.

It reminds me of poker where people would post their performance stats and ask which ones could be improved, rather than posting hands and talking through their thought-process. Focus on strategy, and the rest follows.
  • #83
  • Nov 16, 2009 8:00am Nov 16, 2009 8:00am
Expectancy and risk-reward ratio are for the theorists and beginner traders. Good concept that traders should be aware of, but it won't necessarily guarantee success.

The secret is to find a formula, instrument and timeframe that suits your personality.
  • #84
  • Nov 16, 2009 7:41pm Nov 16, 2009 7:41pm
Quoting TraderT
Expectancy and risk-reward ratio are for the theorists and beginner traders. Good concept that traders should be aware of, but it won't necessarily guarantee success.

The secret is to find a formula, instrument and timeframe that suits your personality.

Hi TraderT

I wish I had said that...

A very clear and concise set of statements about Risk/Reward ratios

.
  • #85
  • Nov 16, 2009 11:04pm Nov 16, 2009 11:04pm
Quoting jacko
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

Hi Jacko,

That's good to hear and ditto.

I always have a low risk / high reward and I am also probably the most boring trader you will ever meet. I spend equal amounts of time in excel as my platform.


Anyway...
Everything I do in the stock and forex market is solely from back testing and executing trades which have "proven" positive results and as I explained earlier I have yet to see my entry/exit numbers be tweaked to a higher profit with a equal or low r/r level. So that is probably right, I am an optimist. But isn't that vital for executing trades?


I have this from trading stocks where my main income is and I am not sure if that is the right procedure in forex but it’s working. To my full potential? not sure...


Over to something else, I have seen your posts before and I have one question. How on earth can you only trade a couple of times a week?
I have tried that several times but it feels so WRONG!

I don’t care about systems and all that, psychologically. How do you do it? Is this something you have learnt over time?

And do you make more because % winners have increased or actual pips or %?


Cheers,
Larseg
  • #86
  • Nov 17, 2009 12:07am Nov 17, 2009 12:07am
Quote
Over to something else, I have seen your posts before and I have one question. How on earth can you only trade a couple of times a week?

I'm obviously not Jacko, but maybe I can shine some light here. I trade the 4h and slower, and would only average a few trades a week. It's actually very relaxing, and suits me far more than when I was trading fast charts. Some traders prefer scalping, others prefer riding longterm trends. I can see how such slow trading would be boring for many traders, but it's perfect for me. I don't think it's any less profitable either, at least not for me.
  • #87
  • Nov 17, 2009 3:26am Nov 17, 2009 3:26am
Quoting jacko
Exactly.... I agree . Like I said previously, 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.
hey jacko..

what is your name in dailyfx forum..

cheer vincy balbao
DRAGON-TECHNICAL ANALYSIS!
  • #88
  • Nov 17, 2009 8:04am Nov 17, 2009 8:04am
The idea of achieving High Reward per risk is great, the reality of getting it is not so easy.

For me I like the concept of achieving High Reward, however my planning doesnt ask for it per se because I cannot expect it to happen, nobody can.

In the end I trade for it by allowing trades to mature. I have exit plans in place where I take profits and allow a small part of my trade to run, you will be surprised over time how the cumulation of some small lots can build, with a great deal less of emotion built in.

New traders argue the matter in a different light because they see the following. 10x R/R at 5% = $$$$$$$$$$$, they fail to calculate reality into the equation. In the end it is not the be all and end all of trading and there are a great deal of other pieces needed to be profitable over the long run.

Razor
  • #89
  • Nov 17, 2009 10:18am Nov 17, 2009 10:18am
Quoting jacko
Hi TraderT

I wish I had said that...

A very clear and concise set of statements about Risk/Reward ratios

.
Hi Jacko, i wish i knew all these theories don't work, when i first entered the markets. Today i still make these mistakes, but i keep reminding myself to cut down on them. The journey to success is much longer than i thought it would take, had i know it would take so much time, money and sleepless nights, i might have given up at the beginning.

By the way, Jason Janovsky's book (Art of the Trade), has many good pointers, which includes Buy/Sell 50% retracements in the major trend.
  • #90
  • Nov 17, 2009 5:46pm Nov 17, 2009 5:46pm
Quoting hanover
Those who are serious about in a career in forex must embrace the realities.
So true.
  • #91
  • Nov 17, 2009 5:49pm Nov 17, 2009 5:49pm
Quoting TraderT
Expectancy and risk-reward ratio are for the theorists and beginner traders. Good concept that traders should be aware of, but it won't necessarily guarantee success.

The secret is to find a formula, instrument and timeframe that suits your personality.
Would the turtles agree? The secret lies in flawless execution.
  • #92
  • Nov 17, 2009 6:41pm Nov 17, 2009 6:41pm
quote=TraderT;3239437]Hi Jacko, i wish i knew all these theories don't work, when i first entered the markets. [/quote]

These theories do "work", they're just not understood. They aren't theories anyway, they're facts. Expectancy is the mathematical value of your edge. R:R is simply the ratio of average loss to average win. These aren't to be mistaken with the estimate of expectation (usually based on backtesting) and the artificial R:R (choosing R:R before the trade). Expectation and R:R are absolutely critical, as they both exist in the formula that allows for a profitable trade. R:R is one of the variables of that formula, and expectation is the result in the formula.
  • #93
  • Nov 18, 2009 5:01am Nov 18, 2009 5:01am
Quoting Razor_trader
The idea of achieving High Reward per risk is great, the reality of getting it is not so easy.

For me I like the concept of achieving High Reward, however my planning doesnt ask for it per se because I cannot expect it to happen, nobody can.

In the end I trade for it by allowing trades to mature. I have exit plans in place where I take profits and allow a small part of my trade to run, you will be surprised over time how the cumulation of some small lots can build, with a great deal less of emotion built in.

New traders argue the matter in...

Very true Razor, it's shit hard work mentally...

I used to have a couple of post it notes around my laptop saying, be disciplined and etc. But that didn't really work so good, it worked better when I read a paragraph from Alexander Elders living for a trading... or any other book for that sake....


Anyway, here's what I am reading before I sit down pr today. Hope someone find it useful


Discipline cheat

We give in to our fear when we don’t take the next trade because we’ve just been through a string of losers and fear losing again. We give in to our fear when we put our stop loss too close and get stopped out of a trade without giving the trade enough room to develop. We give in to our fear when we freeze as a trade starts to lose money, and we don’t take the exit signal because we’re afraid of losing money.

We give in to our greed when we take a profit early, before the regular signal, because we don’t want to give back any of the profits. We give in to our greed when we trade more contracts than we normally would because we feel good about this trade.

To be a disciplined trader, you have to know how and why to enter the market, when to exit the market, and where to place your money management stops. You need to manage your risk and maximize your cash flow.

Even the market gurus and famous traders don’t make money from their predictions; they make money from proper trading discipline. Over the years, they have learned the discipline to control their risk through money management. They have learned to take the trades as they come, and not forgot a trade because they are second-guessing their strategy or the market. These are the same practices that you will learn to include in your trading strategy.

Who are you to second guess your strategy?

Sound money management and risk control are the keys to being a profitable trader. It is not the prediction or the latest and greatest indicator that makes the profit in trading, it is how you apply sound trading discipline with superior cash management and risk control that makes the difference between success and failure.

Today, you will love to lose. You will love to lose because your money management will let you bee in the market getting it back plus more.

You are done trying anything else.
  • #94
  • Nov 18, 2009 8:07am Nov 18, 2009 8:07am
Quoting vincy balboa
hey jacko..

what is your name in dailyfx forum..

cheer vincy balbao
Hi vincy balboa


My name in the dailyfx forum was exactly the same as here (jacko)

The main thread is here

I left there to concentrate on trading and making serious money because some young aggressive guys came in with the sole intention of looking for fights rather than attempting to share trading knowledge and experience .

Then later I came here and I found that this Forum was much better moderated and the trolls get booted into the recycle bin very quickly (something which DailyFX did not do).

And this is the only forum I post on
  • #95
  • Nov 18, 2009 8:15am Nov 18, 2009 8:15am
Quoting TraderT
Hi Jacko, i wish i knew all these theories don't work, when i first entered the markets. Today i still make these mistakes, but i keep reminding myself to cut down on them. The journey to success is much longer than i thought it would take, had i know it would take so much time, money and sleepless nights, i might have given up at the beginning.

By the way, Jason Janovsky's book (Art of the Trade), has many good pointers, which includes Buy/Sell 50% retracements in the major trend.
Hi TraderT

I think the biggest issue is that young traders feel this urgent "need" to always be in a trade and always trading.
They have seen the stereotypical trading movies (like the movie "Wall St" some years ago) where traders are yelling and having fights in the trading pits.
What they don't understand is that successful trading is not like that at all. Can anyone imagine Warren Buffett running around, and yelling and screaming down a telephone line while he trades like a madman ??????
I don't think so...
  • #96
  • Nov 18, 2009 8:32am Nov 18, 2009 8:32am
Quoting jacko
Hi TraderT

I think the biggest issue is that young traders feel this urgent "need" to always be in a trade and always trading.
They have seen the stereotypical trading movies (like the movie "Wall St" some years ago) where traders are yelling and having fights in the trading pits.
What they don't understand is that successful trading is not like that at all. Can anyone imagine Warren Buffett running around, and yelling and screaming down a telephone line while he trades like a madman ??????
I don't think so...

The comparison with Buffett limps. He is not a trader, nor has he ever had a computer in his personal office. He buys companies (or their respective shares) as a long term investment.

Secondly, there are great traders out there who conduct a few thousand round trips/day (like Paul Rotter and similar) - So, successful trading can be like that.

Last but not least, since choice of trading style can be very closely correlated to personality, long term trend trading might be the option for some but not for others - especially in light of the fact that profitability is not essentially greater for one or the other (depending on money and risk management).

regards
daytrading
Enter Signature
  • #97
  • Nov 18, 2009 8:41am Nov 18, 2009 8:41am
Quoting jacko
Hi vincy balboa


My name in the dailyfx forum was exactly the same as here (jacko)

The main thread is [url="http://forexforums.dailyfx.com/threads/2373-only-people-live-trades-jackos-pleasure-pain-conversations.html"]here...
Yes JACKO.. I also want a MAKING SERIOUS MONEY...

I am Elliotican and just on Student on Gann master Analysis..

are you a long term trader...

my skype vincybalboa1
DRAGON-TECHNICAL ANALYSIS!
  • #98
  • Nov 18, 2009 2:58pm Nov 18, 2009 2:58pm
Quoting daytrading
The comparison with Buffett limps. He is not a trader, nor has he ever had a computer in his personal office. He buys companies (or their respective shares) as a long term investment.
Quoting daytrading



Hi, daytrading how you going

I am pretty sure Jacko meant it the other way around... as in, you don't see Buffett running around screaming buy/sell...

Assuming he knows Buffet long term investment style where he rarely changes more than 5 stocks a year and sometimes not a single stock.

But I have to say since stocks are my area and I have actually read several books from that guy that he has been lucky. Very lucky, I don't see him as a very great guy (great but not un-normally great) because everyone which bought stocks and kept them before 1950 are rich. But he have been smart and kept all his stocks getting money from dividends, other guys would sell and bought something else at a higher price. Like people are swapping lanes in a car queue ending up arriving later than they would if they would have kept the same lane.

I will also like to save some people their time and tell them to not read his books as the methods he is using is only working if you are rich. He buys a stock as he is buying the whole company…

Quoting daytrading
Secondly, there are great traders out there who conduct a few thousand round trips/day (like Paul Rotter and similar) - So, successful trading can be like that.

Last but not least, since choice of trading style can be very closely correlated to personality, long term trend trading might be the option for some but not for others - especially in light of the fact that profitability is not essentially greater for one or the...


I totally agree about the personality have to fit the trading style, because you are supposed to be here in the long term and simple stuff can keep you away from putting on some trades which in return can end in a tough drawdown… puh..

  • #99
  • Nov 18, 2009 3:01pm Nov 18, 2009 3:01pm
Quoting vincy balboa
Yes JACKO.. I also want a MAKING SERIOUS MONEY...

I am Elliotican and just on Student on Gann master Analysis..

are you a long term trader...

my skype vincybalboa1

Jacko, only puts on a couple of trades a week I think...
check his blog (on his signature).

*********************************************************
I would also like to add that Buffet sold McDonalds in 1998... Because he tought people where going to be fit and healthy.... Was that a smart choice? He went away from his plan... But agan he always has Gilette
  • #100
  • Last Post: Nov 19, 2009 4:33am Nov 19, 2009 4:33am
Quoting Sauron
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.

Spot on buddy
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