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Always Trading With a 1/1 RR Ratio

  • #21
  • Sep 6, 2010 9:18am Sep 6, 2010 9:18am
Quoting Sauron
An advantage of 1:1 is that it keeps the drawdown to a minimum and the trader can risk more on a trade than one who expects 1:2 or 1:3.
This of course applies only when the stop is far enough and it's going to be hit only if the market really changes its direction. For a scalper it is suicidal, as the spread will decrease very fast his profits and any edge would lose its effectiveness.
Also, 1:1 is a great idea to measure the edge and the expectancy of a system, be it discretionary or mechanical. If less than 50% of all your trades are winning when...
not too sure about his, i have a breakout system that shows a loss when trading 1:1 and a profit when shooting for around 80% of atr (usually at least 1:2) interested in your explanation.
Cheers
  • #22
  • Sep 7, 2010 3:34am Sep 7, 2010 3:34am
It is unclear what you are not sure about, as you quoted my whole post, and what you system exactly does.
  • #23
  • Sep 7, 2010 8:44am Sep 7, 2010 8:44am
Quoting Sauron
It is unclear what you are not sure about, as you quoted my whole post, and what you system exactly does.
yeah, this bit:
"Also, 1:1 is a great idea to measure the edge and the expectancy of a system, be it discretionary or mechanical. If less than 50% of all your trades are winning when TP = SL, the system can't be profitable. It doesn't matter what kind of exit one intends to use, at 1:1 the system must show a profit. If not, it is worse than random entries."

my system loses at 1:1 but if profitable at positive risk reward (usually 2x risk as reward, targets based on atr)... so
"If less than 50% of all your trades are winning when TP = SL, the system can't be profitable" what do you mean by this statement ?

Cheers
  • #24
  • Sep 8, 2010 12:49am Sep 8, 2010 12:49am
Quoting Rise
my system loses at 1:1 but if profitable at positive risk reward (usually 2x risk as reward, targets based on atr)... so
If your system loses at 1:1 it means that your entries are worse than random and you could have a winning system by simply inverting the strategy, sell instead of buy and buy instead of sell.
Also, you should enter in the trade AFTER it reached 1:1, you'll be better off. Or you double the size of your stoploss. There are many ways around it.
IMHO, you must look at your strategy after a few hundreds trades and improve it by reducing the number of losses.
  • #25
  • Sep 8, 2010 6:39am Sep 8, 2010 6:39am
Quoting Sauron
If your system loses at 1:1 it means that your entries are worse than random and you could have a winning system by simply inverting the strategy, sell instead of buy and buy instead of sell.
Also, you should enter in the trade AFTER it reached 1:1, you'll be better off. Or you double the size of your stoploss. There are many ways around it.
IMHO, you must look at your strategy after a few hundreds trades and improve it by reducing the number of losses.
interesting..... much food for thought. Thanks.
  • #26
  • Last Post: Sep 9, 2010 1:28pm Sep 9, 2010 1:28pm
Quoting ak_marshal
Hi Majestic12,
i'm currently trying to develop a system that has a 1:1 RR ratio.....

Marshal
Hi Marshal, for the 1/1 method, i trade always with the trend off of a touch of a confirmed trendline and strong s+r area. I always wait for a price bar break to confirm - such as a hammer. I don't stick strictly to the 1/1 but i always want my trades to have room to move by at least that much most of the time. If its obvious price will go a little further then i shoot for a little more.

I like 1/1 also as it allows me to practice easily in programs like forex tester. That way i can focus on my entries and exits take care of themselves. This allows for speedy Practice sessions and a straight win/loss result. It takes a lot of the psychology out of trading though so you still need to practice that part of the game live.
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