Risk/Reward Ratio

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

  1. For the YM i look for

    1:3 but I will take 1:2. I use my estimated probability of winning along with risk reward to come up with an expectancy factor. For example:

    a trade with 1:3 and 1:2 can be equal if the probabilility of a 1:2 is high enough


    (.5 X 3) - (.5 X 1) = 1 = 1:3 with 50% winning chance

    (.66 X 2) - (.33 X 1) = 1 = 1:2 with 66% winning chance.


    From a practicality stance this can be very difficult to judge if you have not spent hundreds if not thousands of hours in front of your screen watching market behavior.

    I am very interested in risk/reward and proabilities daytrading the index futures. Currently I am working on a method that is a low frequency high probability high reward to risk ratio that emphasizes support and resistance.

    Would love to speak with other traders that are interested in using R/R and probability.
     
    #11     Apr 30, 2007