Curious as to what you guys use for a good trade in your book on profit to loss ratio. I stick to about 5-10% total account for max loss so my ratio fluctuates around but normally it's like 1:3 or 1:4....
There is no single right answer. If you take $5 of capital and write a 50¢ spread on it, that's a 10% return on employed capital. A 10-to-1 if you go that route. And what of expectancy? But if you write that on the SPX, and then write something similar on the RUT, and then write something close to that in the DOW,....... you've not got three different positions, but three highly-correlated positions. (You were not making that position-to-portfolio leap in your post, but many conflate their trade evaluations with portfolio health -- until a very bad day comes along. So, beware going glibly between positions and "total account for max loss" thoughts...)
Well not looking for a right answer ... Was curious what others thoughts were on to compare to mine. Always room to grow and adjust for new strategies ... Ya didn't think about portfolio to position aspect ... That's a good point. I stick mainly to ETFs and more specifically SPY, QQQ, IWM and DIA. There just always seems to be something between them that fits my style for what I'm looking for. Figure there's not really a reason to change as long as that stays true and win % stays strong.
Swing trading stocks I use 0.5 to 1.0% of trading capital as a reasonable loss. I look for a 1 to 3 risk to reward ratio.