How do you calculate risk/reward and probability?

Discussion in 'Commodity Futures' started by long, Mar 19, 2023.

  1. long

    long

    I do use support/resistance levels, retracements, multipliers, past useage amounts multiplied by other factors, and whatever else I happen to think of. Back testing is a problem because my methods aren’t strictly systematic. I pick and choose my economic indicators based on correlation to recent price action. My win rate is low but my losses are small with larger gains on the winners. I’ve mentioned on here before that I’m a hedger so I make a lot of decisions based on actual cash flow projections a grower uses to make production decisions.
     
    Last edited: Mar 25, 2023
    #21     Mar 25, 2023
  2. toucan

    toucan

    are you a daytrader trading futures????

    thanks
    toucan
     
    #22     Mar 25, 2023
  3. deaddog

    deaddog

    I doubt that without a systematic method you'll be able to calculate risk/reward.
    Win rate is not important as long as you make a profit.

    To your original question on how you figure out probability without back testing; I'd suggest reviewing the trades you have made. Which set-ups worked the best?
    I have a check list of criteria that I go through before I enter a trade. The more items checked off the higher the probability that the trade will have a successful outcome.
     
    #23     Mar 25, 2023
  4. Solely basing your decisions on fundamentals is more in line with what one would call investing versus trading. You may be better served by exploring strategies that use concepts like technical analysis, market and volume profiles, selling premium in high volatility environments, etc., etc.
     
    #24     Mar 25, 2023
    long likes this.
  5. long

    long

    Everyone here assumes that everyone is a day trader, I’m not a day trader. I’ll call myself a swing trader as most of my trades last a few days to a few weeks. I’ve held many positions for several months but those actually started as a hedge for my production. When I had a substantial profit before planting the crop I closed the hedge with a profit and did something else with the land.
     
    #25     Mar 26, 2023
  6. toucan

    toucan


    Sorry, I only daytrade futures and was looking for others trading the same when discussing risk/reward

    Toucan
     
    #26     Mar 26, 2023