In finance parlance, risk is absolutely a pnl figure. If you don’t own any stocks, you have no risk to stocks going down regardless of the probability of the stocks going down.
%% TRUE; partly, except still a valid principle , even without ''knowing''+ not a prediction. History helps, QQQ tends to do much better reward than SPY; QQQ averages better reward , but not every year. Ag business + others uses weather forecast, risk + reward ; but that also is not a prediction. Most likely why they call it a weather forecast, not weather prediction Good points, RN.
Good Evening mervyn, I LOVE it. Very good results and thank you for the response with details. Great work. Thank you
Risk to reward ratio is an important tool in Forex trading that helps traders make informed decisions and manage risk. This ratio is used to evaluate the potential profit versus the possible loss on each trade, which helps traders maintain discipline and avoid excessive losses. I always look for conditions from my strategy to make a trade with a ratio of 1:2 or more.
In start i think 1:1 can also be acceptable if the traders can build a portfolio of consistently earning some money out of the trades.
Yes, if a trader is confident in his technical or fundamental analysis and the market is clearly showing the direction, he can use a 1:1 ratio as a minimum target for his trade. But here the accuracy of such a trader's forecasts plays an important role in order to trade profitably with such a risk/reward ratio.
I think that even with the 1:1 ratio we can also take account the power of compounding and the account can go too far with wonderful results.