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Disclaimer: All info from Rich Fintech website, Academy, Services are education purpose. Not financial advise.
| Joined Oct 2010 | Status: Trader | 9 Posts
There will be times when your trade can go 100s of pips (if you trading higher TF), and one of the best ways to capture them is to open 2 positions. One with fixed TP, and another open.
Personally, I use a Risk:1 Reward:3+ goal by setting a fixed target for one position and a trailing target for the second position. I make sure I take some pips home but I let it run for the larger winners. In reality, some days the achieved R:R is more, some it is less. R:R is simply a "goal" for you to get in your head based on how you want to manage your money and your trades.
Since you can't talk about R:R without talking about win to loss ratio, should I beat my head against the wall trying to be right 80% of the time? I'm here to make a living, not to be right every single time. NO EGO. It's much easier to be right a lower percentage of the time but still make money because your money management is sound.
THEN if you can get your technicals down, get your entries right, and manage a win/ loss ratio of closer to 50% (coin toss odds) you'll be set to make money consistently-- which, after all, is the point.
Joined Mar 2009 | Status: Getting closer to ...... | 1,787 Posts
R:R is an after the point fact. As a trader you goal is to trade your signals, get the best price, the best position size to best improve your equity growth. YES it is part of the planning process to have a clear understanding BEFORE you execute your trade where your SL will be, which governed with MM will give you your Position Size and also the most likely points that you are going to
1) Take full or partial profit
2) move SL to lock in BE or more profit
Having the forethought of I need to aim for 3:1 will not work as there will be situations that come into play that will have you manage your trade differently. For anyone saying they leave positions in play regardless of market behaviour because they HAVE to hit 3:1 or whatever it may be is either talking BS or doesnt care to much about the long term outlook ie They are expecting to make larger the normal returns.
I have for years now been working on the infinite yield theorem and can tell you that it is near on impossible to do, watching large or proportionally good returns turn into nothing because you have some R;R expectancy. It is only after the fact that you can work it out. That doesnt mean that achieving the result is out of the ordinary. In fact you could just move your SL to lock in 1:1 from BE once the position moves to 2:1 and so on. If the market retraces back then you get your R:R based on that but that is about all you can do and that is trade management.
High R;R is limited, they happen very seldom so you in a sense have a lower win rate (another after the fact number that is thrown around and abused) where as the lower R;R are usually easier to attain as market moves naturally take less time to get there.
Plan your trades completely. Have in your mind the most likely places you are going to encounter trouble and have a game plan for slow market moves and fast ones. Once the dust settles and you work out your gain then you can see where that trade lies.
And one last thing, dont get too hooked up on the R:R because you have looked at historical prices and they have move 2000 pips from where you MIGHT have entered or from where you DID once enter. The old saying 'gee if only I held that trade I could have ...........' is a real black hole that will have you breaking rules and plans which usually leads to equity demise.
Take care of the here and now
RT
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