Proft/Loss Ratio

Discussion in 'Strategy Development' started by karsat, Feb 10, 2006.

  1. karsat


    I have a question regarding proft to loss ratio, I know that depends
    on the type of instruments and type of strategy....
    lets say for example momemntum type strategy and instruments are nyse or nasdaq stocks, for example 30 cent profit to 20 cent loss on transaction....
    i.e...either take 30 cent profit or a 20 cent loss...., I know it still depends
    on various factors but in general any ideas what you guys think would be the best? Thanks in advance for any help
  2. That's the same as asking "How long will it take for me to drive somewhere?"

    The reward/risk numbers are all over the map. The same goes for the %wins. You might be a long-term trader with a 2:1 r/r and a 40% win rate. Or you might be a scalper with a 1:1 r/r and a 70% win rate.

    The r/r tends to go up on longer time-frames. The %win usually goes in opposite direction from the r/r.

    These are just general guidelines. It ALL depends on the instrument, the time frame, and your trading style.

    Good luck.
  3. You were assuming that you had a 50% win rate and a 50% loss rate. Focus more on limiting losses and executing a system/method that you feel comfortable with. Risk/Reward ratios vary from trader to trader as Billy stated earlier.
  4. MAE's and MFE's...days of the week...time to next news event....The # of support and resistence zones...the entry techniqe, the timeframe, the strenth of the sector and individuals....the list goes on and on and on and on....etc...