1:1 Risk:reward gives me a 90% win rate but...

metatrader54 said:
Currently my take profits vs stop loss are approximately 1:1, it is set according to market structure which happens to often be approximately 1:1. I get a pretty decent win rate with this (easily over 80%), however whenever I try to optimize it or "let winners run" it turns to shit, I probably get way less than 50% win rate with this.

I trade with the trend, but not the trend (if that makes sense), I don't try to follow and ride the trend, that fucks me up somehow.


Attached is somewhat a basic idea of how I trade. (When I say basic idea, it is VERY basic)
Entries are at red lines (with first 3 longs, the rest shorts).
Take profits are at the previous highs/lows after entry, therefore I don't really ride the trend but still use the trend as "confluence", the risk:reward isn't good because of this.

How do you guys recommend to optimize? Definitely a higher RR ratio would be preferred. I have thought of using different sessions as movers/new highs or lows during NY/London, or using news as a catalyst for a new high/low, however didn't find anything useful. What do you guys think?

I also find that if the candle is unable to break the previous high/low with the wick trying to breakout then closing below the previous high/low, it's some indication that I should be ready to take profits. (which is what I currently do), if not I'll just let the trade run. There's another method I use to take profits and often gives me a 1;1 as well, it's pretty accurate too, so the problem might be which setups I should take not how to know which setups to run them with the trend.

I can get pretty good entries as well, (price often reverses at most few pips against me after I enter, so I'm able to tighten my stop loss). Or I should just start with a small stop loss since I'm able to get a good entry often? This is something I don't really want to do because as I trade FX, I'm sure there tends to be "noise", or spikes, or such during the day, since I already trade H1 time frame and below, I don't want to be taken out of the trade easily.


If some of the more senior traders could give me some ideas or advice that would be perfect. I having a feeling that I have to think more of a market structure approach, things on the chart that show whether the trend will continue or not, but unsure how to move forward.

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metatrader54,

How many trades did you execute to calculate the 90% win rate?

Thanks
 
The 90% at 1:1 RR is a temporary condition. It will stabilize around 70% if it's a winning system. Many scalpers who arrive at 65-70% w/ 1:1 as an overall average do so in varying ways, not necessarily because they consistently put a stop and target equal distances away from each entry.

You can get 90% at 2x reward vs 1x risk in a strong trend (e.g., closing price trending to one side of 20 ema). The reason it's (90%) unsustainable is not because the method breaks down over time. It's the false positives which bring the win-rate down (i.e., you think you're taking a trade in a continuing trend or what you think is the first phase of a new trend but you're not). That's what gives the 40-60% win rate long-term. However, the reward to risk ratio still remains in an area that puts the bread on the table. It's very low odds to lose on a trend trade when you actually are in a continuing trend (duh).

You're far better off accepting that there's a basic math to the markets, things which the market will let you get away with on a short-term basis and things which will not pan out long-term. You'll save a lot of time and money by just accepting them, not by thinking you're special and will find "a glitch in the matrix".

There's examples of traders on ET who have an overly high opinion of their guessing ability but suffice it to say the markets eventually correct their gross error in self-assessment of trading competency.
 
SteveH said:
The 90% at 1:1 RR is a temporary condition. It will stabilize around 70% if it's a winning system. Many scalpers who arrive at 65-70% w/ 1:1 as an overall average do so in varying ways, not necessarily because they consistently put a stop and target equal distances away from each entry.

You can get 90% at 2x reward vs 1x risk in a strong trend (e.g., closing price trending to one side of 20 ema). The reason it's (90%) unsustainable is not because the method breaks down over time. It's the false positives which bring the win-rate down (i.e., you think you're taking a trade in a continuing trend or what you think is the first phase of a new trend but you're not). That's what gives the 40-60% win rate long-term. However, the reward to risk ratio still remains in an area that puts the bread on the table. It's very low odds to lose on a trend trade when you actually are in a continuing trend (duh).

You're far better off accepting that there's a basic math to the markets, things which the market will let you get away with on a short-term basis and things which will not pan out long-term. You'll save a lot of time and money by just accepting them, not by thinking you're special and will find "a glitch in the matrix".

There's examples of traders on ET who have an overly high opinion of their guessing ability but suffice it to say the markets eventually correct their gross error in self-assessment of trading competency.
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Yes this is what I'm thinking, therefore I wanna try to get a higher risk:reward ratio, with a lower (but decent) win rate.

"You'll save a lot of time and money by just accepting them, not by thinking you're special and will find "a glitch in the matrix"."

I don't feel I'm special, if I'm special I would have like 70% win rate with 1:10 risk:reward ratio.

I feel a 70% win rate with 1:3 RR would be the goal and dream for me, however there's still a lot of work to be done and experience to be gained!
 
metatrader54 said:
Hundreds.
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I believe if you have 100s of trades over the past 1-2 years market cycles, you should be good.

Are you comfortable with the drawdown of these 100s trades that led to 90% win rate? What is your drawdown of the 90% win rate strategy?
 
metatrader54 said:
Yes this is what I'm thinking, therefore I wanna try to get a higher risk:reward ratio, with a lower (but decent) win rate.

"You'll save a lot of time and money by just accepting them, not by thinking you're special and will find "a glitch in the matrix"."

I don't feel I'm special, if I'm special I would have like 70% win rate with 1:10 risk:reward ratio.

I feel a 70% win rate with 1:3 RR would be the goal and dream for me, however there's still a lot of work to be done and experience to be gained!
More...

There's one person who is consistently publishing all of his trades, claiming to get around 70% winning pct area with a 4 to 1 reward to risk ratio (you would call this a 1:4 RR). His name is Roberto. He trades bigger name stocks, one of Ross Cameron's trader dudes, favors mainly downtrend sell-offs starting 3 min after the open. Apparently, he makes 100-150K a year doing this. He posts on Ross's "Warrior Trading" YouTube channel, on Fridays, full-week summary. Here's the latest clip:


And on the contrary. There's a lot of people on ET who think they're special. They're so special that they think explaining how they trade, the signals they take, will adversely affect their future outcomes.

If you have more then 2 nickels to rub together, you should be trading futures, not Forex.

[NOTE: I use the word "you" and "your" a lot in my posts. Usually, I mean it in the impersonal sense instead of saying "one", not in the personal sense as in YOU in particular. So yeah, I could re-word posts so that they sound more milk-toasty impersonal, but given the overall level of discord on ET, I'll pass.]
 
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I don't get what the issue is... with a 80-90% win rate on a 1:1 RR being traded live already, what more are you asking for? You can compound the crap out of it until you hit liquidity and slippage problems.
 
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