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

Right, so as traders we can simply respond to what price is performing and attempt to limit our risk and increase our gain by taking complete advantage when chances presents themselves. That is not going to happen if we insist on cutting profits brief regardless of what the market is offering us.

Yes we restrict the risk (reduction ). That is not the topic. The topic in question is which method is more profitable? My logic tells me it can not be answered because we do not know how many times price will zig zag in a range or even . Assuming both approaches were profitable, logic also suggests that the trend trader that lets profits run will probably have a handful of winning trades using losses. Where the 1:1 RR trader will have more wins than losses with each profitable trade being less than the trend traders profitable trades.

With that said, I discover that I trade mostly with the long term trend unless I've a reason not too. And my entries and exits are where they make sense to me. I don't use a formula or RR. Nor do I shut all or allow it to run. Occasionally I allow part of it run, sometimes it all, occasionally none of it (shut all).

I think the fault resides in the original post of this thread in which roofx has been quite generic. A RR of 1 works, so do additional RRs and, in some cases, a RR is not recommended.

Like every argument that has faulty assumptions and the answer to that is more determined by the man who answers as opposed to the question , I'll take my leave and wish you success for your own trades.

Best,
D

Not at all, it is about performance, return for risk, that is the yardstick used in fund when analyzing any investment or speculation, not that made the most money.

Sure....and an investment which has performed well equates to more dividend income or much more worth in your inventory....forex it equates to more cash in your account.


Sure, but the greater your win rate should be to compensate for inferior risk:reward, the more times you want to be right along with the sharper your accuracy at forecasting should be.

We are straying off the topic...

Yep I agree...I was simply saying that trading does really need an element of prediction.

He and sorry knows I don't like to say this however, the Mutt is proper.

Consider the amount of times the market transferred several times your TP.

Additionally look at how often you get nearly into the TP and it reverses heading all of the way back to your own SL.

Ask yourself if you take whomever given to you less or more than 1:1 will your account be much better off, odds are it'll be.

Much like the SL are you better off if you tightened then SL.

Of course you may have instances where you had of been better off, but general is what counts.

Ofcourse if you havent got the time to see the market afterward 1:1 is all you can likely do although I'd be on the lookout for setups with 2:1.

Assuming both approaches were equally profitable, logic also implies that the trend trader that allows profits run will most likely have a handful of winning trades with a lot more losses. Where the 1:1 RR trader will have more wins than losses with each profitable trade being much less than the tendency traders profitable trades.

So in a market that can be volatile and unpredictable one approach maximises profit when it gets direction directly and the other is dependent more on getting it right more frequently than wrong. I guess the question is are we from the trading business or the calling business?

A very reasonably presented point of view but you know I'm not likely to agree....

Is trading about being correct and winning a commerce or is it about earning as much cash as you can for the risks taken?

In a market where you don't have any control and that may be unpredictable and volatile you have to be right more times than you are wrong to make a profit. That puts more emphasis and reliance on your own abilities that are predictive and more significantly on the market agreeing with your view, and every new trade is new exposure to risk. Additionally, there are the problems...

I have really been enjoying this thread, as it goes hand in hand with some research I have been doing.

I'm not going to argue either way (in the minute:-D) I'm only going to point out that one of the very prosperous day traders on wall street is famous for saying he is just happy hearing the money bell ring... He is happy going for singles...

Are you guys see Pitbull by Marty Schwartz.... Great book!

I'm just going to point out that one of the very prosperous day traders on wall street was famous for saying he's just happy hearing the cash bell ring... He's happy going for singles...

Wall St, different ball game completely from what I've read/heard/seen, but possibly some comparisons?

Have you guys read Pitbull by Marty Schwartz.... Great book!

Nope however, it seems to get rave reviews! Fantastic book is it?

some study I have been performing

And was it conclusive?

Hey Pipmutt,

Thank You for your reply. You might be right that it is a different bull match but for me it is always helpful to see unique traders mindsets.

It's among my top two favorite trading books! It will not provide you any system but lets you take a glimpse into the life of a trader, which for me is much more valuable. It is quite entertaining as well which is always a bonus.

How can you specify conclusive:--RRB- I've read other studies on the topic which all appear to come to the identical decision and mine was no different. A favorable RR leads to a more profitable return.

Nevertheless this for me is the key... how many traders really, are going to have the ability to remain consistent to a system which gives them a strike rate of lets say under 50%?

Regrettably the answer is a only a few. If they accept the trades when they put up following a draw down which is inevitable and can not remain consistent, then the system and hence the border are changing. If the system says take a setup and they don't then suddenly they have changed the advantage...

Where as I guess the majority of retail traders anyhow would decide on a worse risk reward but better strike rate. Since they could then remain consistent to the system they'd really end up better than heading for the home runs.

I'm not saying it's right and indeed it has been shown to lower the dollar return on paper, but if you take into account the trader then in actual fact a better strike rate might be more profitable in fact...

Not wanting to begin any conflict:--RRB- just offering up my thoughts.

I am still learning but at the market, for me personally it's better to take what market gives so if it;s 1:4, 1:3, 1:7 or greater RR I will take it, by 1 I meant SL that is little or for me personally Risk.
So better in my opinion is our trend line, fractals and MA at one time to locate decent answer where leave SL and get out by price- manual or by market- SL .

Hey Pipmutt,

Thanks for your Answer. You may be right it is a different bull match but for me anyway it is helpful to see unique traders mindsets.

It's one of my top two favorite trading books! It will not provide you any platform but allows you to have a glimpse into the life span of a prosperous trader, which for me is more valuable. It is very entertaining as well which is a bonus.

How do you define conclusive:--RRB- I have read other research on the topic which all seem to come to the same decision and mine was no different. A more...

You make several great points.

For me personally, trading as Pipmutt suggests which is to basically do exactly what I have preached a lot about on this forum and then trade the market allow it to determine when to depart... I did this for a long time but in the end the market wasn't picking anything. It was me. I was a very long time optional trader and lately attempted to mechanicalize (I know that's not a word) my own system. The departure was the toughest to systematize but I came to the conclusion of shooting for the large ones as well as taking smaller profits when I decided that was the right thing.

In the end it was very optional regardless of which way I did it. Setting collection R:R makes no sense because in shooting all those large Rtargets you come more victim into the market game which involves a lot of discretion I believe. The stop searches, shake outs, news, profit taking, market hours, session changeovers etc etc.. The start of moves that are massive are the most straightforward.

So in the end of my mechanization I have settled to increase my risk and take profits before these variables are more dominant on a move. This makes sense to me. For intra day trading that is.

Nothing has changed in my system or money management except earlier profit taking at greater risk per transaction.

I shall return to this thread and make sure you let you all know how it went for me. I'm a huge fan of pie. . Mmm

Secondly to all the above after taking a 1:1 there's not anything stopping me from jumping back into a movement if things look right. That is different to adding into a trade I'm currently when going for all those big ones in as I do anyway at various points.

Oh yeah it is true it is true. I'm a man... And a weirdo. Comes with the job.