It seems anytime money management is brought up, your told for example to make 2 pts for every 1 you risk... or 2.5:1... The reasoning is normally something along the lines of if your doing 3:1 then you only have to be right x% of the time to be profitable... Which is beneficial because you don't have to "predict" which way the market will go.... It seems like common sense that if you have a 50-50 shot of the market going up or down, then simply cutting your losses quick and letting profits run will result in you being profitable.. All the testing I've done shows this to be incorrect. Whether your Reward/risk is 3:1 or 1:3 does not matter because your chance of it being a winning moves WITH the risk/reward ratio... The win% is actually very efficient at moving correctly with the changes in the risk/reward ratio. Which means for it to be profitable you do infact have to have a edge giving you a better than 50-50. Chance. This is not a debate about expectancy. Yes you can have a profitable strategy that only wins 30% of the time but makes money due to the winners being substantially bigger than losers... The point i'm making is that strategy at its core has to be better than 50-50 since the win% will move in line with the risk/reward ratio... Hence, their is no obvious reason I see to strive for a ratio such as 3:1...so how come vendors, books, traders all harp on needing to have bigger winners than losers? *NOTE*: Granted I have seen cases where moving the risk/reward ratio made an unprofitable strategy profitable.. but after further inspection this appears to just be random chance where the numbers happen to "fit" good there.. the same thing can be accomplished by bringing the risk/reward ratio towards more risk and less reward as well... Has anyone else backtested sufficiently large quantities of data and come to the same conclusions? Or am I seeing things that is not there?