18th June 2012 Update -
Question: What benefit was gained from this particular thread?
Answer: It was a fantastic way to collect together the posters and mutts I needed to add to my ignore list. Following a few miserable sods diluted any content with their diarrhea and trailed the discussion, a result above was obtained.
Notice to new readers of the thread: Conserve your time and only read the first page if it's in any way useful to you. It is going to only take a moment and you are welcome if you discover no use for this, to lose it as trash. Also remember that this forum is sponsored by, and profits from, brokers and other businesses who (most of that ) do not need you to succeed in trading. Lastly, if people rant and rave about the old, overhyped procedures, and the majority of people lose their cash. . .any lightbulbs light up out there?
The most frequent belief among forum Traders is that a 1:2 or greater RR is essential for profitable trading. Individuals who say that this are that there's a 50% likelihood of this market hitting their SL plus a 50% chance of it hitting their target. Well a simple understanding of simple and trading math would show that there is a chance of price hitting 20 pips compared to hitting -10. Many traders think if they can come up with a sytem which has a very slight edge that 1:2 or greater RR will be what makes them money.
The trouble is that they will need to have an extremely strong edge to acquire a 1:2 or greater RR platform to be right 50% of the time, purely because it's more likely that price will hit their stop more often than it hits their target.
So what is another strategy to this market for people who do not have a huge edge? A 1:1 Risk Reward Ratio.
When we leave off transaction costs for a moment we can say that a 100 pip cease has about as much chance of hitting as a 100 pip Goal. I myself cover about 1.2 pips total transaction cost per trade that's 1.2 % of this 100 pip target. Every triumph will net 98.8 pips and every loss will net -101.2 pips. So our system needs to have a little 2.4% edge to break even. Anything more than that and we're into profit.
Thus, finding a pattern to enter on that is right 6 days out of 10, provides a total profit of 188 pips. Being right just 51 times nets 80 pips.
So we're taking about a system/method that's only a slight edge and bingo, we're earning money. A pattern which works out slightly more often than it does not is all you need with a 1:1 RR. So why put all that pressure on to have a edge large enough to work a 1:2 RR?