Do high win % ratio trades require invert risk/reward?

Discussion in 'Trading' started by empee, Jun 18, 2006.

  1. empee



    Most traders like to look for positive risk/reward (actually reward/risk right?) Meaning for every $1 risk you make $2, $3 whatever..

    My question is on winning system say 80%+ winners do they risk twice as much as they win (actual expectancy would still be positive) to give the trade "room the breathe" etc.

    I am a low % trader (around 30-45%) so I was wondering why these hi probability systems see.

    Meaning, when they are 80% right, what is the reward versus risk. If you were getting reward/risk even close to 1:1 you should get ridiculous returns (assuming you can find the trade often enough).

    Just curious. Thanks.
  2. Good question...

    As you work with systems over the years, you can keep stats on this....sort of a sliding scale on each side...

    I have concluded that most of the published systems that have a higher winrate illustrate smaller targets with bigger stops. This is a no brainer to understand. MAE and MFE studies reveal the mechanics of this.

    When tuning a system I find the best systems to be loosely set up, and to not over optimize too tight.

    It is best to use use several systems with high winrates and others with low win rates....when you combine these you might discover correlations that lead you into each system...

    I will not say more, or I will need to kill you :)

    Michael B.

    P.S. Beware of the 90% winrate on its big losing day...