Risk/Reward Ratio

Discussion in 'Index Futures' started by increasenow, Mar 14, 2007.

  1. what is the best risk/reward ratio and what do you use?..please advise...thanks...for the emini SP 500...
  2. 1:1, but I'm only looking for 12 ticks of the YM a day, so its not too bad with a good setup.
  3. Bare minimum: 1 to 1
    Acceptable: 1 to (1.1 - 2.0)
    Great: 1 to 2.1+
  4. Hi
    how do you calculate the second R?

  5. Exact R/R is not as important as maximizing profits. For some setups 1:1 is the best way to trade, for some there is no fixed R/R at all, I just trail stop, so in reality it means that some trades close at 1:1 and some at 1:10+.
  6. romik


    The larger the reward the better, that simply means that you can afford to have more losses than wins & remain profitable.

    To achieve that I look at strong signals derived from a longer time frame (like a 60 min chart) that provide wider range expansion (increasing reward) & zooming into entries on shorter time frames to keep losses as small as possible by entering near current high/lows (when not possible reducing size to adjust).

    When opting out for 1:1 you simply can not turn profitable unless your win rate is adequate. Saying that some traders manage to have an inverted r:r and stay on top of the game, but I would not recommend that at all. Sometimes that does happen depending on market conditions, but not as a routine.
  7. How a trader calculates their risk to reward is different to each of us. For me, I have a clearly defined entry and stop at each trade. Therefore I know going into the trade what my risk is. From that, I can caculate my risk to reward based on the expected profit from the trade.

    For example - at 10:50am EST approx on the EC I went long. My initial stop was 5 ticks. That part was easy. My reward was set at twice the risk, or 10 ticks, which provides a risk of 1.0 to a reward of 2.0.

    I will say this - for me at least, exiting a trade is by far the most difficult part I struggle with. If you cover too soon, you beat yourself up for exiting too soon; if you wait and 'give back' money, you beat yourself up for that as well. It's really a matter of testing things and see what you are comfortable with.
  8. Zero. I want no-brainer 100% P(win) trades. Anything else is gambling.
  9. Are you implying that you have never had a losing trade hypo? If so and trading with real money, that's quite a feat!
  10. ============

    Hypo , he said ''wants'100%':D ; therefore he told the truth as written. Even elite olympic skeet shooters miss 1 or 2 out of 100.

    Best RRR;
    enter near support for longs, resistance for shorts.Trend study could help.

    And ES observation could help, like smaller profits late FEB in ES longs could have given you a message. Comparison of ES to other things you trade can be personaly helpful/rewarding also

    #10     Mar 16, 2007