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

  1. #1
    Junior Member aipkrgeta's Avatar
    10

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

    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?

  2. #2
    Senior Member Strikersipk's Avatar
    201
    The reason why I don't hear your crap is that I am really making profits that people like you guys....
    Wow, hostile are not we? I suggest you return to your trading system because having a conversation is certainly not your strong suit.
    Can you two girls kiss and make up, it is nearly the weekend!

  3. #3
    Junior Member gagokva22's Avatar
    14
    If, as an example, your put your SL in 20 pips because, say, it is a recent maximum high, why use a multiple of the number to ascertain where you may set your TP even though those two components are entirely independent store in one's specific mind?
    I can see exactly what you mean. Some people seem to be good at establishing transactions and goals.

    But if my Sl is 20 I know that all I need is a TP of 20. It's not necessary to consider monitoring even or stops and TPs BEs. I think it makes trading simpler from a perspective. And for me, that is certainly what I need. So my only worry will be winning more transactions than I lose.

  4. #4
    Junior Member gagokva22's Avatar
    14
    Will you two women kiss and make up, it is almost the weekend!
    I am sure you prefer to watch

  5. #5
    Senior Member Strikersipk's Avatar
    201
    But if my Sl is 20 I know that all I want is a TP of 20. It's not necessary to think about trailing even or stops and other TPs BEs. I think it makes trading simpler. And for mepersonally, that's certainly what I want. So my only worry would be winning transactions than I lose.
    Then you're not harnessing the real potential of the market or trading it, you're restricting your own development.

  6. #6
    Senior Member Strikersipk's Avatar
    201
    I'm sure you like to watch
    Yeah okay cancel my past, kick each other's butts, it is far more entertaining!

    ding ding....round two

  7. #7
    I can see what you mean. Some people today seem to be good at establishing transactions and goals.

    But if my Sl is 20 I know that all I want is a TP of 20. No need to consider monitoring stops and other TPs or even BEs. I think it makes trading simpler from a plogical point of view. And for me, that what I want. So my only worry would be winning more transactions than I shed.
    I hear you, but just how do you feel if the price goes your way another 100 or 200 pips once you take your profit? Wouldn't it be better use of your effective entry to allow the market tell you exactly where and when to take your profit?

  8. #8
    Junior Member gagokva22's Avatar
    14
    I hear you, but just how do you feel when the price moves your way another 100 or even 200 pips after you take your profit? Wouldn't it be a better use of your successful entry to let the market tell you where and when to take your profit?
    Great debate, but that would go for any TP you choose to take. Market could always move up 100 or even 200 more. For me personally, it's about accepting my own risk and accepting my own profit. There will be plenty of opportunities to return into that commerce When there's a trend that continues.

    And that is actually the point. While I make 20 pips on that commerce, I am thinking excellent job, another person would believe damn, missed out on a lot of pips.

    Men, I am not making any secret of my trading expertise. Not for one moment do I want to tell anybody what to do or how to do it. I do have expertise in probability games and variance and I know the best way (for me personally ) to tackle them from a plogical perspective. For your machine, I think that it is secondary by far.

  9. #9
    Junior Member pkrpklas's Avatar
    1
    Interesting conversation, I think (but am not sure!) The answer is to include systems (and I mean totally tested systems not just grabbing a new one of the forums that appear to be working) First you need to have the metrics on your current system moving back 5-10 years (if you have not been trading it that long then manually backtest commerce by trade....secondly the new system should aim to match the old system ( when you put the equity curves together for old and new that the curve should smoother (not necessarily bigger!) . . .the system I have been trading for the past few years has a win rate of around 46% but typical win is 1.4 versus typical reduction -0.9....the new system I've developed, tested and now trading reside has a win rate of 59.5% profit is 0.94 average reduction is -1.05 (all these calculations include commission and slippage) Profit factor on the first is 1.32 and about the next 1.21....but what really counts are the equity curves. . .my first system typically goes through a drawdown of around 18-28% eery 18-20 months....the new system drawdown is a maximum of around 12% each 6-10 months....but, when u put the two together the maximum drawdown overall is 14-18% plus a far smoother ride! Also and like among the other people who posted said is that the plogy...I get rewarded with the ocassional big win on the original system and'm also plaed by the frequent wins of the new system....oh and that I can scale up my stakes entire as I know what to expect (incidentally I always presume double the worst drawdown is around the corner! ) )
    J

  10. #10
    Lame...

    This is the reason why I really don't like sharing my stuff in here...

    Firstly I'm not altering up because I'm having any excessive pull down... I'm changing up because after analyzing this is what I found to make more money.

    Second I believe I have a better view of my self and what I'm doing than you men.

    Thus saving yet another rant I will just agree to disagree. And leave it at that.

    The reason why I do not hear your rubbish is that I'm really making profits that people like you men always tell everyone are hopeless. So good luck doing...
    not sure what your problem is. Then just do not post if you do not like critique, it's as simple as that. A forum is here for thoughts.

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