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

  • #261
  • Jun 11, 2012 7:23pm Jun 11, 2012 7:23pm
Quoting pipmutt
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....
Yep I have to agree with you on this one.....this game forces you to take a long hard look at yourself internally and more than likely do things you have never before contemplated mentally.....
  • #262
  • Jun 11, 2012 7:26pm Jun 11, 2012 7:26pm
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?
Could you please give us all the details of your system and instructions on exactly how to use it
In all seriousness (is that a word??) yep sure...its quality of life for me that denotes success.
  • #263
  • Jun 11, 2012 9:59pm Jun 11, 2012 9:59pm
Quote
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.

Quote
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!

A 1:1 R:R can be just as effective as any R:R given the right circumstances. You are the only one that is debating this. They're are a lot of good traders here. A few of them have posted and know that there is no best R:R. So your wrong again. You talk about logic. Well it's not logical to be bias. Especially when it comes to a R:R ratio.

You have ran out of steam thus the reason you keep wanting to talk about my profits instead of the thread.You state i tried to divert the conversation with compounding. Compounding and R:R are relative. If you were half as smart as you think you are you would understand this!


Quote
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......


You insinuated I was the one advocating a 1:1 R:R as if it was a novice statement. I can read between the lines thus the reason i called you out with a challenge and you declined! Floyd!

Quote
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.


Even traders that are novices have the mental capacity to understand there is no room for bias. Again especially with an R:R ratio. It's not about what the market offers it's about what you want from the market relative to your trading method. Also they're are plenty of traders as i have mentioned that have posted similar thoughts as mine. So i guess were the majority. I hope you feel good about yourself being the minority an all.

Quote
eWhat 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...


Like i said what i look for in the market is 2000% a year. I average .5% to 1% in the forex market and A little more then 1% in the stock market. So you pulled out your calculator and worked out the max of these figures. Which is not what i said. Right know my stats are in the higher end of these figures since March when i opened up stat tracker. So yeah i am on track for higher then 2000%. You are right! As far as risk yes i know more about risk then you. I don't try to exploit the uncertain future. Hogs get slaughtered! Also Who's to say i was bragging. This is a competitive game . I have no problem with you telling me what your profits are. Matter of fact what are they? You made a comment also about me wanting to be the first trading billionaire. Well yeah that's my goal!.I don't rule out possibilities. You have no idea what I am working on.


This is your way of trying to get out of the thread debate. Nit picking on obsolete comments.


Quote:
lol, you're the one who suggested it, not me! As soon as I agreed you did a 180, too funny....
[/quote]

No you didn't except the challenge you pussed out! Show me where you accepted my challenge. You won't be able to do that will ya! From my end the challenge is still on. Floyd!

__________________
My trades are 100% profitable 65% of the time!
  • #264
  • Jun 11, 2012 11:45pm Jun 11, 2012 11:45pm
Quoting Nexas
Hey Pipmutt,

Thanks for your reply. You may be right that it is a different bull game but for me anyway it is always useful to see different traders mindsets.

It is one of my top two favorite trading books! It doesn't give you any system but allows you to take a peek into the life of a successful trader, which for me is more valuable. It is very entertaining as well which is always a bonus.

How do you define conclusive :-) I have read other studies on the subject which all seem to come to the same conclusion and mine was no different. A more...
This was a great post.

1:2, 1:1, 2:1 are all the same in that they're relative and proportional to each other and the market. Unfortunately for us, we don't know which one will be most successful in any given year. That is why arguing which is best is pointless, in my opinion. Not to say that it is pointless to discuss. It does make for good stimulation of the mind.
  • #265
  • Jun 11, 2012 11:53pm Jun 11, 2012 11:53pm
Quoting jimmyjames79

A 1:1 R:R can be just as effective as any R:R given the right circumstances.
Anything can be just as effective as anything given the right circumstances!


Quoting jimmyjames79
You have ran out of steam thus the reason you keep wanting to talk about my profits instead of the thread.
You're the one who started talking about your profits, I was just pointing out the discrepancies.


Quoting jimmyjames79

You state i tried to divert the conversation with compounding. Compounding and R:R are relative. If you were half as smart as you think you are you would understand this!
Your claim is that 1:1 can compound an account faster than a higher R:R. I was simply pointing out that wasn't actually true.


Quoting jimmyjames79

It's not about what the market offers it's about what you want from the market relative to your trading method.
Classic! Really, is that what you think?


Quoting jimmyjames79

I hope you feel good about yourself being the minority an all.
I'm perfectly comfortable where I am thanks, I can support my opinions with reason and logic. I'm in good company being in the minority.


Quoting jimmyjames79

Like i said what i look for in the market is 2000% a year. I average .5% to 1% in the forex market and A little more then 1% in the stock market. So you pulled out your calculator and worked out the max of these figures.
No, the average of those numbers actually.


Quoting jimmyjames79

As far as risk yes i know more about risk then you. I don't try to exploit the uncertain future. Hogs get slaughtered! Also Who's to say i was bragging. This is a competitive game .
lol, congratulations, pretty much every word of that paragraph is nonsense!


Quoting jimmyjames79
I have no problem with you telling me what your profits are. Matter of fact what are they?
What are you, my accountant? Now how on earth are my returns going to help you become a profitable trader, and how are they even relevant to this discussion? By the way didn't you understand the bit about the insignificance of quoting return on it's own?


Quoting jimmyjames79

You made a comment also about me wanting to be the first trading billionaire. Well yeah that's my goal!.I don't rule out possibilities. You have no idea what I am working on.
Maybe I'll see a flying pig today.....


Quoting jimmyjames79

This is your way of trying to get out of the thread debate. Nit picking on obsolete comments.
So you're saying your comments are obsolete? I'd call them misguided and ignorant but ok, I can go with obsolete if you like.


Quoting jimmyjames79

No you didn't except the challenge you pussed out! Show me where you accepted my challenge. You won't be able to do that will ya! From my end the challenge is still on. Floyd!
It's still on? Great! I accept! Now like I've said before, twice, go and trade for the 6 months on a live account which you suggested for this contest and assume that I'm taking the other side of all your trades, then come back here in 6 months and we'll see where we're at. How's that, clear enough for you?
  • #266
  • Jun 11, 2012 11:55pm Jun 11, 2012 11:55pm
Quoting 2+2=4ex
This was a great post.

1:2, 1:1, 2:1 are all the same in that they're relative and proportional to each other and the market. Unfortunately for us, we don't know which one will be most successful in any given year. That is why arguing which is best is pointless, in my opinion. Not to say that it is pointless to discuss. It does make for good stimulation of the mind.
I agree completely....R:R is for each trader to decide what suits his own trading persona and the market conditions he considers himself to be trading in. Its foolish and naive (or both) to say one is better than another.
  • #267
  • Jun 11, 2012 11:58pm Jun 11, 2012 11:58pm
Quoting 2+2=4ex

That is why arguing which is best is pointless, in my opinion. Not to say that it is pointless to discuss. It does make for good stimulation of the mind.
Less risk for more reward is obviously best, it just depends on what the market offers. I keep asking but nobody has answered, why would anyone purposely cut profit short if it's being offered, what's the rationale behind that approach?
  • #268
  • Jun 12, 2012 12:09am Jun 12, 2012 12:09am
Quoting pipmutt
Less risk for more reward is obviously best, it just depends on what the market offers. I keep asking but nobody has answered, why would anyone purposely cut profit short if it's being offered?
Pipmutt, that seems like a logical thing to say. And it is. However, what if a trader, say you, me or someone else trading this way, doesn't catch a good trend in 2 years. In other words you didn't make any profit. Meanwhile Mr. 1:1 has made 1000 trades in that time with a 55% win rate and 2% risk per trade. Who did better?

Now let me repeat, I am not saying either one is better or worse. I'm just saying.

One more thing. This is kind of branching out from the current topic, but when you trade with the mindset of letting profits run, when do you finally take the profit? I know what I would be on the lookout for. Just asking to get your response and make more conversation.
  • #269
  • Jun 12, 2012 12:10am Jun 12, 2012 12:10am
Quoting pipmutt
Less risk for more reward is obviously best, it just depends on what the market offers. I keep asking but nobody has answered, why would anyone purposely cut profit short if it's being offered?
As you have admitted, none of us know which way the market will go at any given second.....so what YOU consider the market is offering you at that time is different to how everyone else sees it. So whilst YOU are seeing it as an oportunity to let it ride....the smaller RR guys are not.....if that makes sense....its your individual perspective on what your chart is showing you at the time.....we all see it differently. Otherwise we would all trade the same way....or there would be no one taking the other side to your trade.
I am not arguing with you here., I agree with a lot of your posts...I will adjust my trade to what I think the current conditions are at the time when my initial target is about to be hit, but I dont expect you to be making the same decision just becaseue I see it as more pips on the table....its individual and that in turn makes your question redundant.
  • #270
  • Jun 12, 2012 12:11am Jun 12, 2012 12:11am
Quoting pipmutt
Less risk for more reward is obviously best, it just depends on what the market offers. I keep asking but nobody has answered, why would anyone purposely cut profit short if it's being offered?
I've answered you just refuse to accept it. Here we go again.

 

  1. Chasing big targets produces smaller win rate
  2. Smaller win rate = smaller risk rate (1%) On average I can make 1/4 4 - 8% winners (if I'm lucky)
  3. Chasing 1:1 produces higher win rate
  4. Higher win rate = higher risk rate (3%) On average at the end of the week I can make 3/4 3% winners

I choose one or the other because in doing consistent things I get consistent results.

It's a tactical ploy utilizing equity that is perhaps otherwise not even used. Think of your account and draw down. You have say $50,000 in your account but risking 1% there is at least $45,000 not getting utilized.

If we can "safely" dip into this amount and make our equity work harder for us then why not>?

It's just a different plan of attack to achieve the same thing.

Time hides Nothing
  • #271
  • Jun 12, 2012 12:17am Jun 12, 2012 12:17am
Quoting 2+2=4ex

Pipmutt, that seems like a logical thing to say. And it is. However, what if a trader, say you, me or someone else trading this way, doesn't catch a good trend in 2 years. In other words you didn't make any profit. Meanwhile Mr. 1:1 has made 1000 trades in that time with a 55% win rate and 2% risk per trade. Who did better?
I'm not disagreeing with that point, I'm saying 'it just depends on what the market offers'. It seems some people have no logical reason for setting a mandatory 1:1 other than to have a high win rate and take the money and run when it's available.

Letting profits run doesn't mean I can't take profit ('In other words you didn't make any profit'), it just means I don't limit the profit potential of a trade to 1:1 because like you and others have said, I don't know where the market might go. If it's going my way then I can't see any reason to jump off.


Quoting 2+2=4ex

One more thing. This is kind of branching out from the current topic, but when you trade with the mindset of letting profits run, when do you finally take the profit? I know what I would be on the lookout for. Just asking to get your response and make more conversation.
When the market tells me? Sorry, not trying to be facetious, do you mean specific strategy?
  • #272
  • Jun 12, 2012 12:21am Jun 12, 2012 12:21am
Quoting pipmutt
When the market tells me? Sorry, not trying to be facetious, do you mean specific strategy?
Doesn't have to be specific. Nevermind since it was a vague question. My answer would be either fundamentals changed or we reached a major technical S/R. See how vague the answer can be, lol.
  • #273
  • Jun 12, 2012 12:28am Jun 12, 2012 12:28am
Quoting dean

I will adjust my trade to what I think the current conditions are at the time when my initial target is about to be hit, but I dont expect you to be making the same decision just becaseue I see it as more pips on the table....its individual and that in turn makes your question redundant.
As long as your decision is based on something logical then great, that makes sense to me, it's the illogical win rate chasers who I can't fathom. They seem more focussed on winning than maximising profit and minimising risk.
  • #274
  • Jun 12, 2012 12:32am Jun 12, 2012 12:32am
Quoting 2+2=4ex

Doesn't have to be specific. Nevermind since it was a vague question. My answer would be either fundamentals changed or we reached a major technical S/R. See how vague the answer can be, lol.
lol, I'm with you.

Yes technicals, fundamentals, and trade management. If the market looks undecided I'll lock in profit, maybe reduce exposure, or a combination of both and then see where it takes me.
  • #275
  • Jun 12, 2012 12:34am Jun 12, 2012 12:34am
Quote
Quoting pipmutt
Less risk for more reward is obviously best, it just depends on what the market offers. I keep asking but nobody has answered, why would anyone purposely cut profit short if it's being offered, what's the rationale behind that approach?


A trading system! One that secures profits while at the same time taking risk off the table!

While your busy adjusting take profits and stop losses. You are constantly managing risk while I am securing profits and taking risk off the table.

The best place to be is on the sidelines with secured profits waiting for another highly probable setup.

Once a move is made there's always a pull back. No one can predict when a pullback will occur. Taking profits reduces your exposure to a pullback. Also allows you to reenter after there is a pullback.


You manage trades. I execute them.
My trades are 100% profitable 65% of the time!
  • #276
  • Jun 12, 2012 12:36am Jun 12, 2012 12:36am
Quoting CindyXXXX

Chasing big targets produces smaller win rate

Chasing 1:1 produces higher win rate
And win rate is of primary importance, why?

I don't understand your point, seriously, if there's any merit in it I'd like to know!
  • #277
  • Jun 12, 2012 12:42am Jun 12, 2012 12:42am
Quoting pipmutt
And win rate is of primary importance, why?

I don't understand your point, seriously, if there's any merit in it I'd like to know!
Oh well. You don't have to, just keep doing what you're doing if it's working
Time hides Nothing
  • #278
  • Edited 12:57am Jun 12, 2012 12:43am | Edited 12:57am
Quoting jimmyjames79

A trading system! One that secures profits while at the same time taking risk off the table!
No difference there then. I'm also reducing risk and locking in profit, I just haven't banked it yet.


Quoting jimmyjames79

Once a move is made there's always a pull back.
That's a dangerous and inaccurate assumption to make.


Quoting jimmyjames79

No one can predict when a pullback will occur. Taking profits reduces your exposure to a pullback. Also allows you to reenter after there is a pullback.
What's to stop me doing likewise and adding to my position? I'm already on the train, with no risk and locked in profit, you're out and run the risk of missed opportunity if your retracement doesn't materialise and it continues on it's journey without you. That can lead to chasing the market. If you do manage to get back in you're assuming new risk and what's more you're paying for the privilege!


Quoting jimmyjames79

You manage trades. I execute them.
Execution costs, management is often free
  • #279
  • Jun 12, 2012 1:12am Jun 12, 2012 1:12am
Quoting jimmyjames79
You manage trades. I execute them.
May we call you the executioner then? LOL


http://www.nature.com/nrc/journal/v6...nrc2003-i1.jpg
  • #280
  • Jun 12, 2012 1:24am Jun 12, 2012 1:24am
Quoting 2+2=4ex

May we call you the executioner then? LOL
LOL

I'm sure he'd like to be....it's just as well we live in different continents!

Why's your guy wearing a womans corset?
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