reward to risk ratio | Forex Factory

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reward to risk ratio

  • #1
  • First Post: Oct 3, 2013 5:18pm Oct 3, 2013 5:18pm
I know there are many experienced traders here. I have being trading for 5 years and still learning. Would very much appreciate anyone's feedback.

Recently I'm struggling with the reward to risk ratio of a trade, what would be a good reason to have a reward to risk ratio of less 1? Or would it not make sense at all? Please share your thoughts.

Jsshuai
use leverage with caution...
  • #2
  • Oct 3, 2013 6:45pm Oct 3, 2013 6:45pm
Quoting jsshuai
what would be a good reason to have a reward to risk ratio of less 1?
Generally scalpers have a RR below 1:1 ... even if they are profitable.
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  • #3
  • Oct 3, 2013 8:30pm Oct 3, 2013 8:30pm
Quoting FerruFx
{quote} Generally scalpers have a RR below 1:1 ... even if they are profitable.
That depends on your definition of a 'scalper'
Doing what you like is Freedom. Liking what you do is Happiness.
  • #4
  • Oct 3, 2013 9:51pm Oct 3, 2013 9:51pm
Quoting realjumper
{quote} That depends on your definition of a 'scalper'
Trader looking for very few pips (ie. 2-3 pips) ...
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  • #5
  • Oct 3, 2013 9:55pm Oct 3, 2013 9:55pm
Quoting FerruFx
{quote} Trader looking for very few pips (ie. 2-3 pips) ...
That's what I mean though....there are many other definitions of what being a scalper means.....it's subective.
Doing what you like is Freedom. Liking what you do is Happiness.
  • #6
  • Oct 3, 2013 10:07pm Oct 3, 2013 10:07pm
Quoting realjumper
there are many other definitions of what being a scalper means.....it's subective.
Exactly ...
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  • #7
  • Edited 12:57am Oct 4, 2013 12:00am | Edited 12:57am
The R/R ratio is makes the difference between the winning and losing traders. Trading is all about money management. Anything below 1/2 is more like gambling (not betting). You can use options if it is impossible to have 1/2 ratio on the spot market.
  • #8
  • Oct 4, 2013 12:43am Oct 4, 2013 12:43am
Quoting srmfx
Anything below 1/2 is more like gambling (not betting).
As said in an earlier post, there are a lot of profitable scalpers with a R:R below 1:1 ... And they are far from gamblers.
MT4/MT5 EAs/Indicators/Alerts coder
  • #9
  • Oct 4, 2013 12:56am Oct 4, 2013 12:56am
Quoting FerruFx
{quote} As said in an earlier post, there are a lot of profitable scalpers with a R:R below 1:1 ... And they are far from gamblers.
If you can scalp with binary options with 1/3 RR or even with 1/5, why you should trade the spot with 1/1 R/R?
  • #10
  • Oct 4, 2013 1:03am Oct 4, 2013 1:03am
MM is based on very simple math. If you trade with 1/1 RR you should have 50% winning trades just to break even.
  • #11
  • Oct 4, 2013 1:23am Oct 4, 2013 1:23am
Quoting srmfx
{quote} If you can scalp with binary options with 1/3 RR or even with 1/5, why you should trade the spot with 1/1 R/R?
Binary Options is pure scam in my opinion.
MT4/MT5 EAs/Indicators/Alerts coder
  • #12
  • Oct 4, 2013 1:30am Oct 4, 2013 1:30am
Quoting FerruFx
{quote} Binary Options is pure scam in my opinion.
Don't blame the binary options. They are just a financial instrument. If you choose the right broker they are OK.
  • #13
  • Oct 4, 2013 1:32am Oct 4, 2013 1:32am
Quoting srmfx
{quote} Don't blame the binary options. They are just a financial instrument. If you choose the right broker they are OK.
If you think so ...
MT4/MT5 EAs/Indicators/Alerts coder
  • #14
  • Oct 4, 2013 2:35am Oct 4, 2013 2:35am
Quoting jsshuai
what would be a good reason to have a reward to risk ratio of less 1?
The short answer is if you are consistently profitable by doing so.

To be profitable with such a R:R means you have to have a very high success rate. If you could have 90% of your trades hit TP then I guess you (and I) would be very happy with a R:R of less than 1.

The key point is that you can't take a R:R in isolation. Equally, you often see posts that talk only about hit rate, without a reference to R:R that can be meaningless too.

There is a rough inverse correlation between the two. The worse the R:R potentially the better the hit rate and vice versa.

A better overall measure is expectancy which is described here.

Also this video goes into R-Multiples which is similar and gives a good background.

Inserted Video
Too tired to argue. Too old to care.
  • #15
  • Oct 4, 2013 3:37am Oct 4, 2013 3:37am
Quoting davidb
{quote} A better overall measure is expectancy which is described here.
Excellent point davidb. Most of the traders think in terms of probability, but much more important is the expected value (expectation, mathematical expectation). This is the most important part of the MM which includes RR as well as the probability for profit.
  • #16
  • Oct 4, 2013 3:59am Oct 4, 2013 3:59am
When most traders talk about R:R they are referring to Risk:Reward.
The OP is talking about Reward:Risk which can be a bit confusing although, to be honest, it would make more sense.
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  • #17
  • Last Post: Oct 4, 2013 4:55am Oct 4, 2013 4:55am
haiyo,,
my favorite R : R = 1 : 1
S.C.
if there is something you should keep secret,simply just save it,, so, just
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