We are playing a game of statistics. We are looking for the odds to be in our favor. Correct? Yet we do quite the opposite. All of us traders are taught to get a 2:1 return on our money.. For example.. having a 20 pip stop loss and a 40 pip take profit. Or a 1:1.5 ratio.
Looking at this we already have the odds against us ... You are 50% more likely of hitting the stop loss than the target.. Not to mention our entry strategy that helps improve the odds.
If we want to improve the odds and we change the stop loss to 40 pips and take profit to 20 pips.. then we have a 50% more likelihood of profiting!
There is good and bad to this.. because if we don't profit at least 75% of the time we are going to lose our money... So we need an entry that improves our odds..
Say we find an entry that improves our odds
Lets say we change the take profit to 10 and the stop loss is 40 then the odds improve to a 75% chance of wining this trade. I know the Risk Vs Reward isn't what we are all taught.. but I'm thinking the risk vs reward is counter intuitive. As long as you can endure lets say 7 loss's in a row and your not trading too much of your capital... i feel like you should be able to profit longterm by letting go of the risk vs reward we are taught.. As long as you receive more than enough winners to cover the losers than we create a profitable system. This system would have to win 75% of the time.. and i think this is very doable.
Think about the odds AGAINST you by changing the risk vs reward to 1:4 (Stop loss 10, Take profit 40) There is a 25% chance of losing that trade.. Thats a very good statistic. Lets say you improve the odds by having a conservative entry point and win 60% of the time.. this will improve your odds of losing to less than 20% chance of losing.... Those odds look very good to me.. what do you think?
I make this argument because i see some very good trading programs out there that make money that have risk vs rewards backwards like i propose... I'm NOT saying to not use a stop loss... Thats just stupid and amateur.
As you can see this will improve your odds of winning statistically... I've been paper trading this way for 5 weeks with great success.. I'll continue to watch it for a few more months. Just a thought for my fellow traders.. you don't have to adopt my philosophy fyi.. Just sharing a thought that might help. God Bless.. Goodluck to all!
I'm just an amateur that has been taking a beating on demo but I believe that setting R:R to a fixed value is not a smart move. The market doesn't give a rat's ass about your R:R... What if your TP is above a strong resistance? Personally, I believe that you have to be realistic and analyse price action in order to answer two questions: 1) What will prove me wrong? That will be my SL. 2) Is there resistance in the direction of my trade? There, I'll put my TP. If that gives me a R:R that's less than 1:1, I'll think twice before pulling the trigger, because that probably means that the move is already approaching it's end.
We use these trade ratios for our system, when it comes down to mathematics and probability you are very correct. but take a look at how we manage it... using a probability program. and some other things. this will give you some ideas on how you can adjust your system to do the same.
New Trading Video Being Uploaded now - people use myfxbook for different reasons. we like to help educate traders on different methods for trading. especially manual trading. our demo account was just an example. of hft in action. nothing more. however we have a new product out that is designed for users with damaged accounts recover them. if anyone want to volunteer with a live account. contact me via email or p.m
forexalertsystem posted: New Trading Video Being Uploaded now - people use myfxbook for different reasons. we like to help educate traders on different methods for trading. especially manual trading. our demo account was just an example. of hft in action. nothing more. however we have a new product out that is designed for users with damaged accounts recover them. if anyone want to volunteer with a live account. contact me via email or p.m
You'll get a lot more consumer confidence if you show a long term trading history on myfxbook... do you have a live account on here that you can prove your good results? Words mean nothing in this business. The proof is in the pudding my friend. Show the proof and us customers will come pouring in.
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