DislikedI'd have to disagree with both Dopey and ekiden on this.
A trader's first priority is to protect the money in his account. If you have to determine ratio or profit or stop lose after the fact, you are not in control of the trade.Ignored
QuoteDislikedThe main tools for this are correct trade entry point and a stop loss.
If you are entering a trade, your system, experience and probably a bit of instinct shoud tell you that the entry point is correct. You should know the amount of pips, percentage or whatever you are expecting to take as profit. If you are sure of this, take the trade. If you are not sure of this then you should not be making the trade. You may as well spin a coin and say head's I buy, tails I sell.
QuoteDislikedYour risk / reward ratio tells you how far from your entry point you need to set your stop loss to give you protection from a bad trade. We can't predict the market but we can at least take an educated guess.
QuoteDislikedOn a different and unrelated thread, but useful for an example, is a system on breakouts. This uses boxes for showing various parts of the PA indicating different things, with the intention I assume, of determining where the breakout will occur. My reading of one of the last charts told me that if they'd just apply a few of trendlines on instead, it would show them the PA is moving into a wedge with an underlining support level. From that infomation you should be about 99% sure of the direction of the breakout and the approximate point it will do...
I'm not trying to put you down, but I'm very interested in what you have to say. Is this based on a large number of trades? (maybe at least 30 trades...not large, but that's a good start).
I think to test anything objectively, one has to understand statistics, but maybe I'm wrong.
A quick note
If the market is random (don't agree or disagree yet), and then if you have a 1:1 risk reward trade, you should have a 50% chance of winning and losing on average (ignoring spread).
With the same assumption, if you have a 1:2 risk reward ratio, you will have more losers than winners just by randomness alone.
Now "traders" can test their strategies effectiveness by using the 1:1 RR. If your strategy is superior, you should have more winners than losers, otherwise, you are doing no better than a coin toss.