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Risk / Reward - new approach

  • #21
  • Sep 15, 2011 4:16am Sep 15, 2011 4:16am
Quoting the redlion
as my trading ways evolved i found out that risk reward is b/s

one assumes that we can predict how many pips the market might move for this particular trade, and well i generally dont use SL but this has been discussed elsewhere and im not willing to hear nor argue the soundness of this, so if you want to lecture me save it.

anyway, price is unpredictable but the prevalence in order assuming all things being equal give you a reason to trade in a particular direction. however, in my opinion RR is 50% price can always go against you or in the intended...
Thanks for the post. I must say you are one of just a few posters on these forums who I feel actually know what they are talking about
  • #22
  • Sep 15, 2011 4:36am Sep 15, 2011 4:36am
To OP:

Your thought is not exactly new. There are only 2 (maybe 3) ways of doing risk reward.

1)if you have high rr ratios, eg: 1:3, you can have low win rates.
2)If you have less than 1:1 risk reward ratio, you need to have high win rates.

Over time you will realize that if you are constantly having high win rates, you will start to limit your risk as you become more confident in your methods. It will eventually be a high win rate, good risk reward ratio. And then you will be truly successful.
  • #23
  • Last Post: Edited 5:17am Sep 15, 2011 4:58am | Edited 5:17am
Quoting the redlion

<snip>
anyway, price is unpredictable but the prevalence in order assuming all things being equal give you a reason to trade in a particular direction. however, in my opinion RR is 50% price can always go against you or in the intended direction, and there is no analysis that can stop that.
<snip>
I really don't get this..... For example we have a right trendline break here of a downtrend...big bar.... And we've had an uptrend the whole morning. This is obviously a resumption of main trend. How can your modus be any different then long? How can you assume chances are 50-50?? How can you not anticipate price to continue to go up? After that trendline broke your modus is "up" if you trade the 5 minute. Period.

Sure...we can get FBO of right trendline at the moment of breakout in which case modus could change and I would get out with a small loss in the worst case and re-evaluate what's happening. In my opinion it's really binary..short or long.. depending on your resolution/timeframe and where price resides at that very moment. I'm still in this long BTW, +50 pips now.

regards,
Ivo
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Trouble lies in what we believe to know for sure that just ain't so.
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