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

  • #421
  • Jun 15, 2012 1:50am Jun 15, 2012 1:50am
Quoting hanover

What is "now", if it's not the infinitesimally small slice of time that separates the past from the future?
'Now' is the present time, it's what is actually happening in the current moment (fact) as opposed to what we previously predicted would happen at some point in the future (conjecture). Fact is obviously more reliable information on which to base decisions or adjust previous decisions.


Quoting hanover

Anything that increases profit without additional risk has got to be the optimum bonus!
Exactly!
  • #422
  • Jun 15, 2012 6:54am Jun 15, 2012 6:54am
Quoting pipmutt
The problem with discussions like this is someone starts a thread and expresses their opinion or tries to give what they think is good advice, others point out the flaws or express a contrary opinion, and rather than having a reasonable debate about the merits or otherwise of an idea it descends into chaos with nothing conclusive or constructive ever coming out of it. Lacking the strength of their convictions people on both sides ignore challenging questions, blow smoke, become abusive, or make some generic statement or other like 'it works for...
The problem with this discussion is that for some reason unbeknown to me people have decided to challenge the idea that trading a method that yields 60-70% hit rate at 1:1 risk reward ratio is an acceptable way to trade. An 11 year old child can see that anything that yields a hit rate like that with that risk to reward ratio is a worthwhile exercise. I fail to see why this is SUCH a difficult concept for people to swallow and why some insist it is a waste of time and greater reward to risk ratio methods are the only way to trade. My suspicion is that many are taking the "if I can't do it, it must be impossible" mindset and also that most of the bashers are not profitable themselves and stuck in an angry and bitter place.

Another example of what can turn a perfectly friendly and helpful thread into a complete waste of time and energy (in my opinion) is that participants such as pipmutt are much too fond of their own voices and feel the overwhelming need to dispute, argue and have the last word on everything. And so the thread turns into a peeing contest between the usual suspects who don't even have experience trading the OPs method to begin with. Then nuggets of useful information are lost in the mud that these posters drag the thread through for the feeding of their own egos. And that is why forex factory is largely full of useless drivel when otherwise it could be a mine of solid and useful data.
  • #423
  • Jun 15, 2012 7:02am Jun 15, 2012 7:02am
Quoting Roofx
The problem with this discussion is that for some reason unbeknown to me people have decided to challenge the idea that trading a method that yields 60-70% hit rate at 1:1 risk reward ratio is an acceptable way to trade. In 11 year old child can see that anything that yields a hit rate like that with that risk to reward ratio is a worthwhile exercise. I fail to see why this is SUCH a difficult concept for people to swallow and why some insist it is a waste of time and greater reward to risk ratio methods are the only way to trade. My suspicion is...
No the issue here is............

1. you started this thread like you'd just moved to this method, then it's been 5 years of profitable trading.
2. Your 60-70% is just that, we have no proof to back this up and I'm right cause I have a 104% hit rate. ( see ? )
3. There are better ways to trade, if you haven't got the time then fair enough, if you haven't got the skill to spot your own exits, fair enough, but don't be going all this is the grail, it isn't.


You alledegly have an entry system which gives you 60-70% hit rate ( why don't you know the exact hit rate ? ), so maybe it works for you, but for most it won't or it will but they'd be better off using there brain to search for exits.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #424
  • Jun 15, 2012 7:14am Jun 15, 2012 7:14am
Quoting Turveyd
No the issue here is............

1. you started this thread like you'd just moved to this method, then it's been 5 years of profitable trading.
2. Your 60-70% is just that, we have no proof to back this up and I'm right cause I have a 104% hit rate. ( see ? )
3. There are better ways to trade, if you haven't got the time then fair enough, if you haven't got the skill to spot your own exits, fair enough, but don't be going all this is the grail, it isn't.


You alledegly have an entry system which gives you 60-70% hit rate ( why don't you know...
Ok first let me say again, please learn how to read before chiming in with accusations.

1. I never said I have been trading profitably for 5 years. Actually I only got to the magical place of repeating profits a year ago. And yes, I have just moved to trading a 1:1 RRR 6 months ago and my profitability has increased greatly since doing so, hence sharing my beliefs here on why it is a worthwhile exercise.

2. Yup. Like anyone else on the forum, all anyone has to go on is a person's word. We are not going to post logins to our live accounts or our bank accounts to prove anything. And the point you are missing here is it doesn't matter who's account is at what level of percentage growth or yada yada yada, the purpose of this whole thread was to express a love of a risk reward ratio that improves my trading method tremendously and I thought others could benefit from taking a look or thinking about it too.

3. Yep. I'm sure there are immensely better ways to trade. But why should I care when things are going well? When something works, why fix it?

4. The exact hit rate is different depending on how many days, weeks, months or years the average is taken from. Hopefully you can understand how that works. And hopefully you will read all this more carefully than before so you don't have to go making up nonsense again and completely misquoting me.
  • #425
  • Jun 15, 2012 7:19am Jun 15, 2012 7:19am
Let me just say once again. The reason the hit rate is reasonably high is in large part due to the neutral RRR. Change to a 1:2 or "react to what the market is offering" plan and the method fails.

I would not try this on a 4hr timeframe with large stops and TPs on this pair in this economic climate. Equally, I would not trade breakouts and price action on a M1 chart.
  • #426
  • Jun 15, 2012 7:24am Jun 15, 2012 7:24am
Quoting Roofx
Let me just say once again. The reason the hit rate is reasonably high is in large part due to the neutral RRR. Change to a 1:2 or "react to what the market is offering" plan and the method fails.

So your better off keeping it simple in short and just waiting for seeing, that works for you great, that will ofcourse work for others but I've seen others try it for ages and due to there entry method or lack thereof not work for them.

So what is working is your entry method, your R:R being 1:1 isn't that relevant, its just the easy part to discuss.

Do you feel like sharing your entry method ?? what SL and TP size you use ( might of missed it don't read all posts )

The Mutt will strangely grow on you, yes he's a pain in the arse reminds me of well me strangely, your both right and both wrong at the same time.

You can't argue over an opinion, yours is 1:1 his and mine is not fixed.


So if it works for you, be happy and don't feed the trolls.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #427
  • Jun 15, 2012 7:34am Jun 15, 2012 7:34am
Quoting Turveyd
So your better off keeping it simple in short and just waiting for seeing, that works for you great, that will ofcourse work for others but I've seen others try it for ages and due to there entry method or lack thereof not work for them.

So what is working is your entry method, your R:R being 1:1 isn't that relevant, its just the easy part to discuss.

Do you feel like sharing your entry method ?? what SL and TP size you use ( might of missed it don't read all posts )

The Mutt will strangely grow on you, yes he's a pain in the arse reminds...
Thanks Turveyd for that. Yes it seems I have been unknowingly feeding some trolls.

Yes the entry method is of course giving me good signals but I must stress that without a 1:1 RRR I don't think I could get it to work. It's the combination of the two that works so well. I did once try to explain my entire method, posting my calls before the fact and even offered to do a bit of live webinar trading to explain in realtime but there was a lack of interest. But this thread isn't for that, it was just to talk about the RRR and open some minds to ideas that maybe aren't the same as all the retailers 'teach' and rant on about.
  • #428
  • Jun 15, 2012 7:42am Jun 15, 2012 7:42am
I promised myself I wouldn't get dragged in but now its too late

1:1R is a perfectly legitimate way to trade. and I personally trade similar ratios the majority of the time. My edge is based around market microstructure inefficiencies and this is all my edge effectively gives me. I have tried in the past to use my edge to effectively enter the market 'risk free' however the results are mixed and physiologically tough to deal with. Of course once in a while you can mix this in with other inefficiencies and 'go for the jugular' however I digress..

Risk of ruin tells us we can risk more on higher win rates. Lower R:R ratios give us higher winrate. There is too much focus on individual trades. One needs to step back and look at the larger picture. Monte Carlo simulations are an ideal way of showing this off to great effect and I encourage anyone who doubts the effectiveness of a 1:1 R trade 'system' to download one of the many Monte Carlo spreadsheets that are available on this forum and the net and try plugging in the numbers yourself - you might be surprised.

If you have a 70% win rate at 1:1R then you should have no problems risking 10%+ per trade. lower the win rate and increase the R:R with this sort of risk and the drawdown will be puke inducing.

On a side note nobody knows what their winrate is. It is a naive man that merely divides his winning trades by his total trades to get his win rate. Any body who has done maths at school will know that unless you have a reasonably high sample (I'm talking 100's of trades here) your margin for error can be non trivial. Again this goes back to what I said earlier. Too much focus on individual trades - take a step back - it can be an eye opener!! - Do you lie in bed at night wondering if you’re a profitable trader or just lucky? - I do.. never assume or take anything for granted.

I'll crawl back to my hole now...

BBCMicro
  • #429
  • Jun 15, 2012 7:46am Jun 15, 2012 7:46am
Quoting Roofx
Thanks Turveyd for that. Yes it seems I have been unknowingly feeding some trolls.

Yes the entry method is of course giving me good signals but I must stress that without a 1:1 RRR I don't think I could get it to work. It's the combination of the two that works so well. I did once try to explain my entire method, posting my calls before the fact and even offered to do a bit of live webinar trading to explain in realtime but there was a lack of interest. But this thread isn't for that, it was just to talk about the RRR and open some minds to...
I get @70% win rate with my method, I have a exit method most of the time it gets me out pretty near the top, just the top is often not far from my entry, every 2 normal small profits pays for a SL and keeps me in the game effectively.

If I was to do a 1:1 it would have to be like 10pips if not less, or my win rate would drastically fall off.

It's the big wins, where I ride 100pip moves so 5:1+ which get me ahead, the rest of the trades are are just dipping my toe in and pulling out quickly if it's not right.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #430
  • Jun 15, 2012 7:48am Jun 15, 2012 7:48am
Quoting BBCMicro
I promised myself I wouldn't get dragged in but now its too late

[color=black][font=Verdana]1:1R is a perfectly legitimate way to trade. and I personally trade similar ratios the majority of the time. My edge is based around market microstructure inefficiencies and this is all my edge effectively gives me. I have tried in the past to use my edge to effectively enter the market 'risk free' however the results are mixed and physiologically tough to deal with. Of course once in a while you can mix this...

Well it's a past win rate, you'll have to wait and see the future win rate.

I used to write games in 6502a on a BBCMicro back in the day, class name.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #431
  • Jun 15, 2012 7:50am Jun 15, 2012 7:50am
Quoting BBCMicro
I promised myself I wouldn't get dragged in but now its too late

[color=black][font=Verdana]1:1R is a perfectly legitimate way to trade. and I personally trade similar ratios the majority of the time. My edge is based around market microstructure inefficiencies and this is all my edge effectively gives me. I have tried in the past to use my edge to effectively enter the market 'risk free' however the results are mixed and physiologically tough to deal with. Of course once in a while you can mix this...
Excellent post, especially the part about win rate. This is something that changes depending on the sample size.

And also, I agree with your last comment. We must be fully prepared for the possibility that we are just having a good year and next year our methods will fail. Never take any amount of success for granted and be prepared to change your methods if they begin to fail for an extended amount of time.
  • #432
  • Jun 15, 2012 8:03am Jun 15, 2012 8:03am
Quoting Turveyd
I used to write games in 6502a on a BBCMicro back in the day, class name.
Ah yes I remeber well the hours of typing in games from the likes of Beebug.. and of course the hours of debugging your mistakes later... a mis-spent childhood? most likely...

  • #433
  • Jun 15, 2012 8:07am Jun 15, 2012 8:07am
Quoting BBCMicro
Ah yes I remeber well the hours of typing in games from the likes of Beebug.. and of course the hours of debugging your mistakes later... a mis-spent childhood? most likely...


The good old days, where a programmer ( me ) and a graphics guy ( my mate ) could write a okay computer game in a few months, these days there are 100's of people and many years

Still making a living off it 25years later is the scarey part.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #434
  • Jun 15, 2012 10:55am Jun 15, 2012 10:55am
Quoting Roofx

The problem with this discussion is that for some reason unbeknown to me people have decided to challenge the idea that trading a method that yields 60-70% hit rate at 1:1 risk reward ratio is an acceptable way to trade.
Most people who are confident in their knowledge, experience, and their strategy would be perfectly happy to answer the critics and sceptics, it tests their resolve and may highlight some deficiencies in their strategy. The other side of the coin is it may strengthen their resolve and confirm their ideas are sound.

Unfortunately you don't seem to come in that category, you just pop up and make some wild unsubstantiated claim and expect everyone to pat you on the back and say well done. You're selective about answering some of the very valid questions and challenges which are logically and rationally presented. That suggests to me that you are either far from confident in your approach or that you simply lack the knowledge and experience to reply to those challenges and questions or present a valid case.

What is the purpose of this thread? No strategy, no details, no meaningful performance statistics, just an unsubstantiated claim. That's not really much help to anyone or guidance to novices if that was your intention. If that wasn't your intention then it's a mystery as to your motive for starting this thread.


Quoting Roofx

My suspicion is that many are taking the "if I can't do it, it must be impossible" mindset and also that most of the bashers are not profitable themselves and stuck in an angry and bitter place.
I don't recall anyone saying anything was impossible but if it suits you to believe that then believe it rather than consider the possibility that unsubstantiated claims are challenged for a very good reason. Novices being novices are easily led, they don't really know what they're looking at, and they don't know the questions to ask so it's useful to have someone asking pertinent questions on their behalf.

As far as not being able to do it, seriously? It's really not rocket science you know, you're barely scratching the surface of what can be achieved trading this market.


Quoting Roofx

the point you are missing here is it doesn't matter who's account is at what level of percentage growth or yada yada yada
If you insist on sticking your head above the parapet and making wild unsubstantiated claims on a public forum then you open yourself up to scrutiny. Either rise to the challenge or accept the inevitable, it's just the way it is I'm afraid!
  • #435
  • Jun 15, 2012 11:14am Jun 15, 2012 11:14am
Quoting Turveyd

The Mutt will strangely grow on you, yes he's a pain in the arse reminds me of well me strangely
OMG where's that rope......

Anyway I thought you were going down the gym today and taking your lady friend out for a meal at McD's to use your staff discount?











  • #436
  • Jun 15, 2012 12:06pm Jun 15, 2012 12:06pm
Quoting pipmutt
OMG where's that rope......

Anyway I thought you were going down the gym today and taking your lady friend out for a meal at McD's to use your staff discount?








To lazy for the Gym traded and made $12 or something good day for me LOL

Kids returns to parents, get changed, scrubbed up then off to pick her up.

Hmmmm, next door works on McD's could borrow there card, good plan!!
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #437
  • Jun 15, 2012 12:33pm Jun 15, 2012 12:33pm
Quoting pipmutt
Most people who are confident in their knowledge, experience, and their strategy would be perfectly happy to answer the critics and sceptics, it tests their resolve and may highlight some deficiencies in their strategy. The other side of the coin is it may strengthen their resolve and confirm their ideas are sound.

Unfortunately you don't seem to come in that category, you just pop up and make some wild unsubstantiated claim and expect everyone to pat you on the back and say well done. You're selective about answering some of the very valid questions...
Wow pipmutt, if you think someone recommending a 1:1 RRR and stating that it can directly affect the hit rate is a "wild, unsubstantiated claim" then you must lead a very dull life.

What are these "challenges" you are asking me to "rise" to? This is actually going into the land of the insane. I have to giggle I can only assume you are doing this for entertainment purposes. Have you tried going bowling or to the cinema instead? Prometheus is pretty good.

And I have already answered your question "what is the purpose of this thread" more than once in this very thread. Also you are criticising the fact that I have not explained and shared my strategy here. Pipmutt, in case you have not realised this is not the system section of the forum, it is for general trading discussion and my topic of discussion was specifically on the benefits of a 1:1 risk reward ratio.

This is an awful waste of time. Can't you go and cause trouble somewhere else? Or read a book or something?
  • #438
  • Edited 2:12pm Jun 15, 2012 1:35pm | Edited 2:12pm
Quoting BBCMicro
If you have a 70% win rate at 1:1R then you should have no problems risking 10%+ per trade. lower the win rate and increase the R:R with this sort of risk and the drawdown will be puke inducing.
This explains clearly why the 1:1 trader will wipe the floor with any other r:r. He can risk more and compound faster because of a higher win rate. (10% per trade is probably a bit much though, 70% win rate can still regularly produce 3 trade or more losing streaks.)

Other advantages are psychological. A higher win rate and lower drawdown is easier to do psychologically and therefore lowers the risk of trader error

Thats why it just makes sense to me......unless,

you can achieve the same high win rate with a greater reward to risk and trade frequently enough to match the compounding. If so, I take my hat of to you.

I am never going to achieve the patience and discipline required to achieve this lofty goal because I cant be bothered with that much effort anymore. Ive done my time, the 10,000 hours and now I relax and enjoy trading, happy to exploit the above mentioned advantages of 1:1 rr to assist me.

Its easier. Anything that makes trading easier is is a good thing. We all have lives to live apart from the market

So why put all that pressure on to have a massive edge big enough to work a 1:2(or greater) RR?

Here is an example. With the benefit of hindsight, there were more pips to be had long but I am unable to use hindsight in live trading.
I can however use 1:1, trade in the wrong direction, have a high win rate, compound regularly, and milk 5% from a single session
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  • #439
  • Jun 15, 2012 3:37pm Jun 15, 2012 3:37pm
Quoting M.A.C.Doug
I am never going to achieve the patience and discipline required to achieve this lofty goal because I cant be bothered with that much effort anymore. Ive done my time, the 10,000 hours and now I relax and enjoy trading, happy to exploit the above mentioned advantages of 1:1 rr to assist me.

Its easier. Anything that makes trading easier is is a good thing. We all have lives to live apart from the market

So why put all that pressure on to have a massive edge big enough to work a 1:2(or greater) RR?

Here is an example. With the benefit of hindsight,...

Yeah I hear ya MAC-Doug, Take what Mr. Market gives and be happy with it.... tomorrow is another day.

Once you've put the 10,000 plus hours in if you don't have your system by then you probably will never have one.... and when I say 10,000 hours I say that loosely because that's less than 417 days (with no sleep)... and some may need 15,000 or 20,000 hours.

Sooner or later you will realize what you can live with and sleep well and live life well. When it comes down to it that's all that matters anyway.
  • #440
  • Edited 4:06pm Jun 15, 2012 3:38pm | Edited 4:06pm
Quoting Roofx

Wow pipmutt, if you think someone recommending a 1:1 RRR and stating that it can directly affect the hit rate is a "wild, unsubstantiated claim" then you must lead a very dull life.
If you need to resort to personal remarks to hide your ineptitude and inability to sustain a reasoned debate then you really are in trouble!

The wild unsubstantiated claim is your 60-70%. You of course need to claim that level of accuracy because your whole argument in support of 1:1 pivots around a high win:lose, but it's unsubstantiated. That's not to say that kind of accuracy isn't achievable but we certainly haven't seen anything to support your claim that you're achieving it. Without 60-70% your whole theory about 1:1 crumbles.

If your entire revelation and your argument in support of 1:1 is 'a 1:1 R:R with a high win:lose is profitable' then it really is a non issue, it's very basic math.


Quoting Roofx

I can only assume you are doing this for entertainment purposes.
Perhaps, but you've yet to mention your motive.


Quoting Roofx

my topic of discussion was specifically on the benefits of a 1:1 risk reward ratio.
The important part is not so much the benefits of 1:1 as the feasibility, is it viable. Not without a high win:lose, which as I've mentioned before puts the focus on predicting market direction accurately more than on trading. Ignoring Sharpe type ratios, your performance and returns are directly related to your ability (or otherwise) to predict what the market will do next, in the very short term seeing as you claim to be a scalper.
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