The Smoke and Mirrors of the Risk/Reward Ratio

I concur.

I disagree.

What do you mean by RR rule? And "gurus" ? Seriously...

A higher reward than risk will result in a positive expectancy more likely than a lower one (but only if you already have an edge).It is a mathematical fact. We just concluded in another topic about the randomness of the market, IF the market is fully random, then no matter what indicator you use on it, after infinite number of trades they will all give you the same result because its 50-50 (- spread & slippage so its more like 48%).If its only partially random,then not, but they will be still pretty close - the spread & slippage,so the best indicator out there may give you a winrate of 42-45% depends.

Now, do an expetiment if you dont believe me, take any indicator and enter the trade based on that, and test 2 situations:

1) TP is 2 times bigger then SL, so 2:1 RR and
2) TP is 2 times smaller than SL so 1: 2 RR

Do a huge backtest, atleast 100.000 trades, and i guarantee you that you will always have a bigger net profit with the 2:1 RR than with the other.Even if its negative, the 2:1 RR will always have a smaller loss than the other.So this high reward/ low risk is not a stupid idea.
On the contrary, its the most important advice you can ever hear, so those "gurus" know what are they talking about.

Theory being, if you get to 1:1 on the reward side you'll likely get to 1:2 or move, cause you are with the trend, ofcourse further out you go the trend might change.

You should be using the SL with the same basis, if the SL hits the reason for it being there, is that you believe the market will keep going against you.


Don't use fixed TP's here, take what ever it gives me, but obviously I prefer setups which have good odds of going 1:2 or higher/