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1:1 Risk Reward Ratio - Why it just makes sense

  • #241
  • Jun 11, 2012 9:56am Jun 11, 2012 9:56am
Confused! I know what this thread is about and so do you. You have spent hours naysaying the idea of a 1:1 R:R. Now all of a sudden you have changed your tune. I have debated with people like you. After they realize they may not be entirely correct they flip the debate. as if to say "Oh that's what you were saying"

You say answer my questions. Your questions are obsolete to the thread.


You said in a nutshell that i am an idiot for advocating a 1:1 RR. Well in that case a lot of us are idiots.

There have been several posters that have also identified your flaw in thinking. I am one of several posters that had questioned your statements about a 1:1 R:R. Matter of fact it's overwhelming how many people seem to agree that there is nothing wrong with 1:1 R:R. You seem to be busy replying to all the folks who disagree. You will be here forever!


Seems like you compromised with 2+2 = 4. He has said the same thing as me.

For your information 25% to 30% monthly compounded on your new balance is 1400% - 2400 % a year. do the math. I claimed to look for 2000%.

The contest. Whatever! I was just trying to emphasize that i can trade a lopsided risk reward and still achieve high profits. Even if you won the contest i would have still been able to prove that the R:R is irrelevant.

You have several requotes of mine that state i use a 1:1 RR. Which 90% of the time I do. Then you post a statement where i had mentioned. I'm not stuck at a 1:1. I'm not stuck I do intervene under certain circumstances. I do not see why that would not mean I am not a 1:1 RR trader. I am but with condition control. That still qualifies me as a 1:1 R:R trader. If 90% of my trades end closed as a 1:1 Trader i think that qualifies.
My trades are 100% profitable 65% of the time!
  • #242
  • Jun 11, 2012 10:58am Jun 11, 2012 10:58am
I see the thread is starting to warm up.

I have no concerns either way, RR 1:1,more/less, money can of course be made with 1:1.

I am however interested in whether those that elect to take profit at 1:1 are setting T/P and a S/L in MT4 or are manually taking profit/ closing the trade at S/L level.

My only concern with consistently taking 1:1 is its like a red rag to a bull for the more unscrupulous brokers out there, hence I vary my R:R.

M.
  • #243
  • Jun 11, 2012 12:44pm Jun 11, 2012 12:44pm
Quoting jimmyjames79

Confused! I know what this thread is about and so do you. You have spent hours naysaying the idea of a 1:1 R:R. Now all of a sudden you have changed your tune.
If the discussion is about whether xyz can be profitable then of course, most strategies can be profitable, it's all a matter of degrees and measuring one's performance. Performance isn't about pips or money made, it's about risk taken for the reward achieved. For the vast majority of experienced professional traders and investors 1:1 is unlikely to cut it.

If the discussion is about purposely limiting profit regardless of the market then it simply doesn't make any financial or logical sense to cut profits short if the market is offering more, and again the vast majority of experienced professional traders would dismiss the idea as nonsense without a second thought, hence the often heard maxim 'let profits run'.

After running out of steam to support your weak argument you then started scraping the barrel and rambling on about compounding, I'm pretty certain that's not the topic!


Quoting jimmyjames79

You said in a nutshell that i am an idiot for advocating a 1:1 RR. Well in that case a lot of us are idiots.
I don't recall ever calling you an idiot , it was in fact you who called yourself an 'ill informed dip shit' and the more you post the more I have to wonder if you're right in that self appraisal! If the dunces cap fits......


Quoting jimmyjames79

There have been several posters that have also identified your flaw in thinking. I am one of several posters that had questioned your statements about a 1:1 R:R. Matter of fact it's overwhelming how many people seem to agree that there is nothing wrong with 1:1 R:R. You seem to be busy replying to all the folks who disagree. You will be here forever!
Hey I'm perfectly comfortable being in the minority in a business where the majority consistently lose money! As for 1:1, well if that's all the market is offering then fine, but that wasn't the issue now was it.


Quoting jimmyjames79

For your information 25% to 30% monthly compounded on your new balance is 1400% - 2400 % a year. do the math. I claimed to look for 2000%
What you actually said was "I look for a 2000% return a year. Averaging .5 to 1 percent a day in the forex market and a little more then 1% per day in the stock market", which equates to ~6,000%. You then changed your mind and said "I average 25 to 30% a month and compound daily". As you may or may not know, return alone means very little when it comes to performance so most knowledgeable people rarely spout about return in isolation, it's very novice'ish to brag about unsubstantiated returns anyway (especially when the bragger keeps changing his mind about just how much he claims to make!), it's quite amusing to read though so at least they have a modicum of entertainment value if nothing else!


Quoting jimmyjames79

The contest. Whatever!
lol, you're the one who suggested it, not me! As soon as I agreed you did a 180, too funny....
  • #244
  • Jun 11, 2012 1:01pm Jun 11, 2012 1:01pm
Quoting Nexas

However this for me is the key... how many traders really, will be able to remain consistent to a system which gives them a strike rate of lets say below 50%?

Unfortunately the answer is a only a handful.
Now we're getting to the crux of it, a strategy to compensate for a persons shortcomings.

Isn't that just masking a problem rather than addressing and resolving it?
  • #245
  • Jun 11, 2012 1:28pm Jun 11, 2012 1:28pm
Quoting pipmutt
Now we're getting to the crux of it, a strategy to compensate for a persons shortcomings.

Isn't that just masking a problem rather than addressing and resolving it?
No not at all... part of being a trader is understanding who you are as a person. Whether you like it or not that is the case.

You cannot change who you are as a person but can find a trading approach that suits your personality...

surely you can see that? Or is it really one size must fit all to you?
  • #246
  • Jun 11, 2012 1:32pm Jun 11, 2012 1:32pm
Quoting Nexas
No not at all... part of being a trader is understanding who you are as a person. Whether you like it or not that is the case.

You cannot change who you are as a person but can find a trading approach that suits your personality...

surely you can see that? Or is it really one size must fit all to you?
I think if you wanna be profitable, you have to change yourself to adapt to the market. The market won't change for you.

Obviously not one size fits all, but in general, most people don't have the psychological setup required for being a success in the markets, thus THEY need to change.
  • #247
  • Jun 11, 2012 1:37pm Jun 11, 2012 1:37pm
Quoting Custos
I think if you wanna be profitable, you have to change yourself to adapt to the market. The market won't change for you.

Obviously not one size fits all, but in general, most people don't have the psychological setup required for being a success in the markets, thus THEY need to change.
I can assure you that I am profitable and I do not trend follow. I appreciate that most people won't be successful but I think that is more down to your first statement. Not everyone can change... but not enough people realize there is more than one way to trade the markets.

Remember I didn't say that a more positive R/R isn't more profitable in the long run... I just said for some people that may not suit them. That does not mean that cannot be profitable.

I honestly think the message you are putting across is incorrect. It leads new traders to believe that there is only one way. They really should look at themselves and find an edge that they can work with, if one exists.

Sorry, just my opinion.
  • #248
  • Edited 1:54pm Jun 11, 2012 1:42pm | Edited 1:54pm
Quoting Nexas
No not at all... part of being a trader is understanding who you are as a person. Whether you like it or not that is the case.

You cannot change who you are as a person but can find a trading approach that suits your personality...

surely you can see that? Or is it really one size must fit all to you?
Sure, I've always said that, strategies are tailor made by the trader to suit a whole host of an individuals criteria. However......

Trading requires a very specific minimum set of qualities, some which totally go against everything we know, have learned, or are our basic natural instincts.

One instinct is the need to be right. Another is the need to win. There are some very significant psychological hurdles to be overcome if people want to trade consistently profitably and realise their true potential and exploit the potential of the market. Trying to avoid those hurdles by concocting a strategy which attempts to compensate is not a solution, it's merely masking the issue without addressing or resolving it.

I suppose it depends on what people want to achieve in their lives. Is it rewarding enough, both financially and psychologically, to be mediocre? We are forced to accept our own limitations but that doesn't mean we should settle for below par, that's the lazy way.

Aspire to be the best, if a job is worth doing it's worth doing well.....and other similar clichés!
  • #249
  • Jun 11, 2012 1:49pm Jun 11, 2012 1:49pm
Quoting pipmutt
Sure, I've always said that, strategies are tailor made to suit the trader. However......

Trading requires a very specific minimum set of qualities, some which totally go against everything we know, have learned, or are our basic natural instincts.

One instinct is the need to be right. Another is the need to win. There are some very significant psychological hurdles to be overcome if people want to trade consistently profitably and realise their true potential and exploit the potential of the market. Trying to avoid those hurdles by concocting...
Fair enough...

But and only one but... hopefully :-)... A person should not try to compensate to the point that they can no longer make it work.

I would not consider what I achieve to be mediocre. I have a house, 3 beautiful children who go to good schools, an amazing wife, two cars and am in the processing of buying a small plane.

We don't want for anything and touch wood never will. I give to Charities and plan on building an orphanage in a 3rd world country one day.

I enjoy my life and my family. Surely it is about quality of life?
  • #250
  • Jun 11, 2012 2:09pm Jun 11, 2012 2:09pm
Need help and suggestion.

If i had $200 in my account to start trading, how many % percent that i should use for open trading ? 10% or 5% or 2.5% or 1.5% or 1% or 0.5% or 0.1% just to maintain and avoid early MC?
You are a Fun-Loving Trader (I do better when i have fun)
  • #251
  • Jun 11, 2012 2:19pm Jun 11, 2012 2:19pm
Quoting Nexas

A person should not try to compensate to the point that they can no longer make it work.
They shouldn't try to compensate, period. Either they learn to trade and adapt or they find another career.


Quoting Nexas

I would not consider what I achieve to be mediocre. I have a house, 3 beautiful children who go to good schools, an amazing wife, two cars and am in the processing of buying a small plane.

We don't want for anything and touch wood never will. I give to Charities and plan on building an orphanage in a 3rd world country one day.

I enjoy my life and my family. Surely it is about quality of life?...
OMG, I'm in the audience of a Miss USA contest, lol!

Yes it's completely about quality of life, and part of that quality is the satisfaction of knowing we met the challenge and did our best. Trading is undoubtedly a challenging business and if we want to make it requires extraordinary dedication and sacrifice during the initial learning curve. Do we meet the challenge with a half-hearted half-baked 'I make money so that will do' attitude or do we grab the opportunity and give it our all. Personally there is only one choice, and win, draw, or lose I have the satisfaction of knowing I did my best.

I'm all out of (in)appropriate clichés.......
  • #252
  • Jun 11, 2012 2:29pm Jun 11, 2012 2:29pm
Quoting tuakblues

Need help
Yes you do.

Try reposting in the Rookie Discussion section for helpful advice.

Just reading your profile, "....You have a quick mind and believe in the goodness of life.....". Yeah, trade forex for a while, that will soon change!
  • #253
  • Jun 11, 2012 2:38pm Jun 11, 2012 2:38pm
Quoting Nexas
Fair enough...

But and only one but... hopefully :-)... A person should not try to compensate to the point that they can no longer make it work.

I would not consider what I achieve to be mediocre. I have a house, 3 beautiful children who go to good schools, an amazing wife, two cars and am in the processing of buying a small plane.

We don't want for anything and touch wood never will. I give to Charities and plan on building an orphanage in a 3rd world country one day.

I enjoy my life and my family. Surely it is about quality of life?
Lol,

If you want to prevent an increase in your lot size, keep everything but ditch buying the plane, most are a money pit...
  • #254
  • Jun 11, 2012 2:45pm Jun 11, 2012 2:45pm
Quoting moodybot
Lol,

If you want to prevent an increase in your lot size, keep everything but ditch buying the plane, most are a money pit...
Nah, keep the plane, ditch the wife

Cancel that, I'm forgetting alimony.......
  • #255
  • Jun 11, 2012 2:46pm Jun 11, 2012 2:46pm
Quoting pipmutt
Nah, keep the plane, ditch the wife

Cancel that, I'm forgetting alimony.......
Yep, can lower the lot size then.
  • #256
  • Jun 11, 2012 4:07pm Jun 11, 2012 4:07pm
having a fixed risk to reward system is bad in general, but having 1:2 rr is worst. what your risk should be is like 2, 5 or even 10% of your capital depending on how successful and how aggressive trader you are without shooting for any fixed profits... this doesnt mean however that when you feel you`re in a loosing trede you shouldnt terminate the deal before your risk threshold is hit.

what your risk is should be considered depending on your win percentage total and ofc how much pips you make on average on those winners.(u need to demo to get your risk right - the higher your win% and higher your profits are the larger your risk can be, but rly you shouldnt be hitting more than 10% risk, or mby 15% if you`re super agressive or have extra high confidence in some deal)
the concept of risk should be a safe mechanism when something unexpected happens when you`re away from your trade like some unexpected news, disaster or you get the market terribly wrong, not trying to limit your profits or over-extending them cause of your risk threshold. market is a fluid stream that can float in two directions that change quite fast, sometimes in a couple of hours and the trend is changed for the next day or so.(this for medium term traders, for longer terms ofc it cant take a couple of days or even more)

how am i trading - i usually have 10% risk and i dont shoot for any fixed profit - if i`m currently selling and i think the market will reverse i will just enter long regardles of my profits so far(or loses). bottom line is my risk is usually bigger than my reward, but the thing is that i very, very rarely end up in bad trades. also i never rest from the market - if i`m not selling then i`m buying. i`m a vsa trader btw.

sry for my bad english.
  • #257
  • Jun 11, 2012 5:32pm Jun 11, 2012 5:32pm
Quoting moodybot
Lol,

If you want to prevent an increase in your lot size, keep everything but ditch buying the plane, most are a money pit...
But the plane is so pretty :-)
  • #258
  • Jun 11, 2012 5:32pm Jun 11, 2012 5:32pm
Quoting pipmutt
Nah, keep the plane, ditch the wife

Cancel that, I'm forgetting alimony.......

LMAO... that is quality! But she is pretty too :-)

Did you enjoy the Miss USA contest :-)
  • #259
  • Jun 11, 2012 5:36pm Jun 11, 2012 5:36pm
Quoting pipmutt
They shouldn't try to compensate, period. Either they learn to trade and adapt or they find another career.




OMG, I'm in the audience of a Miss USA contest, lol!

Yes it's completely about quality of life, and part of that quality is the satisfaction of knowing we met the challenge and did our best. Trading is undoubtedly a challenging business and if we want to make it requires extraordinary dedication and sacrifice during the initial learning curve. Do we meet the challenge with a half-hearted half-baked 'I make money so that...
That's absolutely a fair comment. But it doesn't mean you aren't putting in your all just because you aren't trend following...

But each to their own and I completely accept your view.
  • #260
  • Jun 11, 2012 7:21pm Jun 11, 2012 7:21pm
Quoting Nexas
I can assure you that I am profitable and I do not trend follow. I appreciate that most people won't be successful but I think that is more down to your first statement. Not everyone can change... but not enough people realize there is more than one way to trade the markets.

Remember I didn't say that a more positive R/R isn't more profitable in the long run... I just said for some people that may not suit them. That does not mean that cannot be profitable.

I honestly think the message you are putting across is incorrect. It leads new traders...
Nice arguments from both of you......I actually agree with you both.....a succesful trader HAS to change his mindset, particularly in regards to accepting the fact we are dealing in an instrument that we can neither predict or control, however we also need to adapt a strategy that suits our personality or I guess our tolerance for risk etc. Its a mix of both. THats why its so difficult for most to get past that first few years of pain. THis is the stuff that is 10 times more critical to your success than systems and R;R's......the psychological issues.
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