I say that because I get a lot of emails from traders telling me they can't get a proper 1:2 or more
risk reward ratio because there are too many support or resistance levels in the way.
I say that because I get a lot of emails from traders telling me they can't get a proper 1:2 or more
risk reward ratio because there are too many support or resistance levels in the way.
Not exact matches
Further,
because this is a Pullback Buy setup, the
reward to
risk ratio of the trade setup is favorable.
However, yesterday's price action in EEM now makes our
reward to
risk ratio even more favorable for buy entry
because the ETF gapped lower on the open, then reversed to close at its intraday high.
You must devise a trading strategy that exhibits a minimum
risk - to -
reward ratio of 1 to 2
because you need to cater for inescapable losses as a basic component of your trading plans.
So it's a situation with a bit of hair, but I also think that this is a deal that is almost certain to be completed, and
because of that it's still a bet with an attractive
risk /
reward ratio.
Many (if not most) people would take cover instead of taking the
risk because the
risk /
reward ratio isn't worthwhile.
The benefit of this technique is that it's a more conservative approach (
because price is already established above the neckline) that often leads to a good
reward to
risk ratio, especially with descending necklines (see the image above).
The reason I don't trade the standard double bottom technique anymore is
because the
reward to
risk ratio is not good enough.
If you had a predefined profit target set at a 1:2 or 1:3
risk reward ratio, but as price gets close to that target you move it further away
because you «think» price will keep going for an even bigger gain... that is greed, and it will almost always result in you making LESS than you would have if you just exited at your predetermined profit target.
I like it
because you give yourself a better
risk to
reward ratio when it happens.
Those same scalping systems would not work if you adjusted the
reward to
risk ratio much higher
because scalping setups typically have very little follow through.
The reason your
risk to
reward ratio is so important in trading is
because with a 1:1
ratio and a 50 % strike rate (win rate), you would break even.
Your actual
reward to
risk ratio can vary
because some traders (like myself) move their stop loss to break even, and we also exit early at times depending on upcoming news events or market hours.
It is not worth trading
because the distance the market is moving between reversals is not big enough to allow for a good
risk reward ratio.
This technique also works better with steep trends
because the
reward to
risk ratio tends to be better.
This next Forex double top strategy is my favorite technique
because it typically provides excellent
reward to
risk ratios.
Many traders get caught up on losing 2 or 3 trades in a row
because they fail to understand the full implications and practical application of
risk reward ratios that take time to play out.
This is
because it improves the
risk -
reward ratio of the investment by reducing
risk and improving the chances of making a greater profit when, ultimately, the market recognizes the true worth of the share.
On the other hand, if you allow yourself to be consumed by greed and trade with let's say a
risk of 20 % per trade, force the system to trade with negative
risk /
reward ratio because you want to have a win rate of 99 %, you will not have much success with the Forex Force system or any other automated trading system.
If you look at the equity curve you can see that two things: 1) When the market became completely chaotic the system lost more trades than usual but it never resulted in a huge draw down
because of the favorable
risk reward ratio of 1:4 (or better).