High Quality Trades Only

Setups
Any trading strategy/system is welcome

Attached File(s)

!!Risk Reward Indicator.ex4   31 KB | 1,016 downloads | Uploaded Oct 17, 2015 6:32pm

Attached File(s)

!!Mask Orders.ex4   22 KB | 848 downloads | Uploaded Oct 17, 2015 6:33pm

Criteria
Trades with Risk Reward Ratio at least 1:1/2
I personally aim for 1:2, but it is challenging to locate the setups.


Simple Math
Two parameters define it

1. Hit Ratio
2. Risk:Reward

Formula to calculate your required Hit Ratio with a predefined R:R to gain profit
Hit Ratio = 1/(Reward/Risk + 1)
This formula does not include trading costs like spreads and commissions

Example 1:

1. Your RR = 1:2
2. Hit Ratio = 1/(2/1 + 1)
3. Hit Ratio = 1/3
4. Hit Ratio = 33%
5. You need to win only more than 33% of your trades to make profits.
6. In real trading considering other factors, Hit Ratio ~ 40% to make profits

Example 2:

1. Your RR= 1:1
2. Hit Ratio = 1/(1/1 + 1)
3. Hit Ratio = 1/2
4. Hit Ratio = 50%
5. You need to win only more than 50% of your trades to make profits.
6. In real trading considering other factors, Hit Ratio ~ 60% to make profits

Example 3:

1. Your RR= 1:1/2
2. Hit Ratio = 1/(0.50/1 + 1)
3. Hit Ratio = 1/1.5
4. Hit Ratio = 67%
5. You need to win more than 67% of your trades to make profits.
6. In real trading considering other factors, Hit Ratio ~ 75% to make profits

Example 4:

1. Your RR = 1:3
2. Hit Ratio = 1/(3/1 + 1)
3. Hit Ratio = 1/4
4. Hit Ratio = 25%
5. You need to win only more than 25% of your trades to make profits.
6. In real trading considering other factors, Hit Ratio ~ 33% to make profits

Example 5:

1. Your RR = 1:5
2. Hit Ratio = 1/(5/1 + 1)
3. Hit Ratio = 1/6
4. Hit Ratio = 17%
5. You need to win only more than 17% of your trades to make profits.
6. In real trading considering other factors, Hit Ratio ~ 25% to make profits

Poll Updates
Answer the poll to give statistics what most traders use.

Good luck to all,
swilliam

To be fair I generally don't understand or even see the point of anything below 1:1?

It should be 1:2, I can see why people could argue this case.

But if we change the analogy and say

If bet £1 and I flip a coin, heads you make £1 and tails I take it what are the odds you take this deal?

Now if you bet £1 and you make £2 pound, you are much more likely to take that chance.

In regards to this, you would want to refine your trading so you are trading less overall anyway, and looking for 1:2 ratio trades only, if that's not the case then risk management basics are needed again.

Apologies if it's blunt, but my experience and my view.

From one of my other students who have asked me, 'I can never seem to find any 1:2 risk to reward ratios' then your strategy needs to be refined so you know where your targets are, resistance, supports etc.

Hope this helps someone out there reading.

Happy Pipping!

Short on GBPUSD on Trend Line plus test of resistance zone also a 61.8 retracement of previous down move,
Approx 1:2.5 RR.



Hope it work out

Great insight, please show us trade samples.
Keep posted

Ok,

I will be also scanning tonight so I could upload some potential trades I am going to take this week.

If I take any positions this week and think that it would be helpful for you I will also share.

That short on cable doesn't look too bad. the RR is there however I am not on my charts at the moment so cant see the full picture. M question is how did you determine that SL? The TP I can see take out the previous swing low, unless there is a resistance line there from before?

Happy pipping

The Simple Math
There are only two parameters which define it:

1. Hit Ratio
2. Risk:Reward

There is a simple formula to calculate your required Hit Ratio with a predefined R:R to gain profit
Hit Ratio = 1/(Reward/Risk + 1)
This formula does not include trading costs like spreads and commissions

Example 1:

1. Your RR = 1:2
2. Hit Ratio = 1/(2/1 + 1)
3. Hit Ratio = 1/3
4. Hit Ratio = 33%
5. You need to win only more than 33% of your trades to make profits.
6. In real trading considering other factors, Hit Ratio ~ 40% to make profits

Example 2:

1. Your RR= 1:1
2. Hit Ratio = 1/(1/1 + 1)
3. Hit Ratio = 1/2
4. Hit Ratio = 50%
5. You need to win only more than 50% of your trades to make profits.
6. In real trading considering other factors, Hit Ratio ~ 60% to make profits

Example 3:

1. Your RR= 1:1/2
2. Hit Ratio = 1/(0.50/1 + 1)
3. Hit Ratio = 1/1.5
4. Hit Ratio = 67%
5. You need to win more than 67% of your trades to make profits.
6. In real trading considering other factors, Hit Ratio ~ 75% to make profits

Example 4:

1. Your RR = 1:3
2. Hit Ratio = 1/(3/1 + 1)
3. Hit Ratio = 1/4
4. Hit Ratio = 25%
5. You need to win only more than 25% of your trades to make profits.
6. In real trading considering other factors, Hit Ratio ~ 33% to make profits

Example 5:

1. Your RR = 1:5
2. Hit Ratio = 1/(5/1 + 1)
3. Hit Ratio = 1/6
4. Hit Ratio = 17%
5. You need to win only more than 17% of your trades to make profits.
6. In real trading considering other factors, Hit Ratio ~ 25% to make profits

thanks,
i placed SL above swing high. i placed TP on the support area
i project it will go down because the last leg was down.

Hope it gives some pips

long on USDCHF? possible good setup
Set SL below the support, max TP around the resistance

Taking your trades I will not advise what to buy or sell as that's down to you.

Your math on RR says it all, whats the point of going for anything 1:1, the fact is even at a 1:3 ratio and you loose 70% of the time you are in profit.

Who cares about winning %, the main aim of the game is P/L.

Now here's a tip,

When you are placing your SL above a area that you have chosen remember there is also a spread from the brokers! So take this into account and don't let the broker take you out of your trade even though it didn't hit that price.

What I mean is

1.5 is the price

Buy is 1.6

Sell is 1.4

It comes back to 1.4 but your SL is 1.5, you still get taken out.

Does that make sense?

Hope this helps you a bit more

Happy pipping

So you wouldn't be interested in a method with a reward-to-risk ratio of 0.8:1, with a target of 8 pips and a stop-loss of 10 pips, that trades 20 times a day and wins 80% of its trades, then? (I don't have one, but I certainly would, because it would net 440 pips' profit per week with a very smooth equity-curve.)



It doesn't matter whether it's blunt: its mathematical validity is what matters.

Reward-to-risk ratios alone don't tell you what you need to know: win-rate and trade-frequency are also essential, for them to "mean" anything significant, within reasonably practicable and realistic trading parameters.



It doesn't much matter, with that example, because a system with a win-rate of only 17% is close to untradable for anyone without extensive experience, nerves of steel and a huge bankroll: the losing patches (I don't mean just the consecutive losing runs) are so perilous that you'd never know whether you were just having a bad run or it had completely stopped working, and its equity-"curve" would be a horribly random shape.

Mathematically speaking greater than 17% is minimum using 1:5.
Realistic is around 25-33%. But of course it would be better to have higher.

Personally i aim around 1:2 with Hit rate around 50%

No even if you have a 80% winning ratio and your RR is less than 2:1 it's not worth it.

Trading is a personal business, so if it works for you it works for you then good for you.

In regards to my group of friends, all my ex clients and professional traders I know, NO-ONE trades less than 2:1, in fact I think I am the only one trading 2:1 where they are 3:1 and above.

As I previously mentioned in a post before

Those pips = money

Why would I risk £10 to make £8? when if I work harder and wait to refine my entry and risk £10 to make £20.

I doubt anyone can keep a 80% winning ratio all year round.

But hey if it is good for you and keep doing your thing.

Happy pipping

We have rather different ideas of "worth it", I suspect, Daniel.

The system I mentioned trades 100 times per week with a profit-factor of 3.2, as you can see from the figures above - but hey: if even that's "not worth it" for your ex-clients and friends, then fair enough - I'll happily have their share.

An R:R ratio alone doesn't give you enough information to know whether a system is worthwhile or not.

What matters is whether it consistently wins more from its winning trades than it loses from its losing trades, and to work that out, you also need to know its win-rate. (And knowing its trading-frequency doesn't hurt, either: a system that trades 4 times a year isn't much good to anyone.) But to dismiss a system that takes 100 trades per week with a profit factor of 3.2 on the grounds that you've already arbitrarily decided that anything below 2/1 R:R "isn't worth it" strikes me as somewhat eccentric, to put it ultra-tactfully.

I agree that R:R alone doesn't give you enough information to know if the system is good enough or not but in the idea of building your own strategy you should be aiming to these figures and applying good risk management

Personally 100 trades a week a huge and way to much for me but that goes back again to the point that trading is a personal game if it works then stick to it, and Happy pipping!

However I totally disagree that well not systems, but there are professionals that their trade frequency is very low, there are some long term holders who can trade 4 times a year and have huge returns or even running trades from previous years.

And yes on my grounds of trading I generally wouldn't have anything for 1:1, anything below 2:1 wouldn't be considerable. Bearing in mind I do take trades of 1:1.5 but they are intraday ones but during the time frame when these happens you judge for yourself whether worth taking or not.

On that grounds of this also, risk reward ratio is only 1 section of risk management before entering to a trade. Risk % draw downs etc these all occur too, and in fact should be taken into account

Regardless, I am not claiming that 1:2 is a must go. But simply its more attractive than a 1:1.

At the end of the day all this is subjective

If your P/L is positive in the long run and you are living your life then that's all that matters.

Happy Pipping !

great input guys

overall this will depend on the trader, which works for him

Now we can post some trades

possible to short USDJPY? on resistance area

shorted USDJPY on 119.70
SL around 25pips, TP around 60Pips

I go around 1:1/2 to 1:3
But the average is around 1:1 for breakouts, 1:2 for swing

btw, nice thread

that short set up doesn't look bad at all!

USDJPY went 20Pips but i was stopped out at BE.
Still holding my GBPUSD short