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Risk to reward ratio ??
- Thread starter niting
- Start date
Look up positive expectancy, this is much more important. http://www.stator-afm.com/positive-expectancy.html
Depends on the system.
Quote from niting:
What is the ideal risk to reward ratio successful traders are using. When i use 1:2, market gives me 1:3 but i end up taking 1:2. Then next time i use 1:3, market gives me only 1:2 and i end up taking a loss.
I don't recommend using them unless you have in-depth statistics that tells you what type of ratio to use and when you should be using a different ratio for different types of market price action.
For example, maybe your trade signal statistics for the morning trading session shows that you should be using a 1:3 ratio.
However, maybe your trade signal statistics for the afternoon trading session shows that you should be using only a 1:2 ratio.
Throw in some volatility analysis for different types of volatility market conditions...
You could be using a completely different ratio for the morning and afternoon trading session.
The worst thing you can do is to randomly select a ratio without doing any type of statistical analysis to determine what's suitable for your particular trading signal.
By the way, my trading improved dramatically when I stopped using risk to reward ratios.
Mark
(a.k.a. NihabaAshi) Japanese Candlestick term