Depends on what you are trading and your trading plan. Some traders believe that to determine trade entry the risk should be 1 to make3 (units). Of course, this then requires a stop loss to help fix the risk. The problem then is determining the target or profit "harvesting". So Risk vs. Reward may be calculated and if the risk is say 3 to one then it is obvious that choice of trades will determine how many "small" losses that will be recovered by the larger profits on the winning trades. To me, this is all "HOGWASH" -- Wrong thinking. I believe using stops is of no value unless you must put trades on and just rely on getting out with a determined win or loss target or amount. In other words, you cannot monitor the trade real time. I put lots of trades on without the need of stops and found ways to manage the trades Profitably without using stops. Stops will cause unnecessary losses. So the answer is High Probability Entries and using trading strategies that allow for taking "corrective" actions to ameliorate loss. It may also help you to trade multiple contracts so that you may take partial profits quickly and then set what you might call a "trailing Stop" on the remaining contracts to achieve maximum gains without risking the profits you first took. If you wish more clarification please note the areas that may be confusing by this answer. In general Managing the Trade is of prime importance and stop losses will not achieve that.
Simply : Price, Time, Volatility & Exposure. Theoretically easy. Practically puzzling. These three (w/o Price) tend to magnify the outcome (Price Distribution). If one can read the conditions then it's as easy as cruising a sailboat. Take only low risk trades (Worst Case but Benign Scenario). Cut your loss quick and short ... Scale Down (?). Take your profit in due time, Scale Up (?) ... Well ... One need a solid understanding of the market, his strategies and about himself. It's not easy ^^ But one can be and do his best then progress only if he's not dumb enough to take himself out of the game.
Sorry...I have to admit that I have some setups with negative R:R. They have been too good to me to throw away. They do trade infrequently at times. I won't argue with other traders about this..it's just something that I've found throughout the years!
Yes ... Cause the key ain't RR. It's the advantage ! RR alone means nothing. But it's part of the equation. Not everyone gets rich buying lottery tickets even though the RR is nice.
That is very true. You have hit upon a truth. Obsessing about stop placement or "risk reward ratio" is kind of like watching the shadow of something vs. the thing itself. Plus, if you want to be a big trader "stops" don't scale well.
Scaling into a winner is just as dangerous as scaling into a loser. You open yourself to the same amount of risk per position. And as your position grows in contract size, so your stop would have to shrink to minimize the potential loss. Scaling-in and-out is a bloody, nasty business. I'm still working with it and it's not for the timid. It is like a previous poster typed in another recent thread...You should have (or need) a gigantic account for it. For us general peeps though, it is bad juju all around, this scaling thing.
Based on your post, I assume you average down. How do you deal with a high probability area not responding as expected, when you have added all your risk can handle? More importantly, assuming I got the averaging down assumption right, how do you handle having potential winners on lesser size, basically, the complete opposite of the topic. Apologies if I read your explanation incorrectly.