I can't seem to find a good risk/reward ratio. Please help.

seconded

trade2finind
I don't even have to bother reading pedro's posts to know he'll be talking sense - listen to him.
 
pedro01 said:
Re-read what I said. Use the formula. If you get out at 1 point with a 4 point stop loss, then of course you will expect:

%win rate = (100 / profit ticks + stop loss ticks) x stop loss ticks.

%win rate = (100 / 1 + 4) x 4

= 80%

It does not matter what the price does after you exit. All you will see there is the results of something called 'confirmation bias'. But if you must.....

4 point stop loss, 3 point target = 57% win rate WITH NO PROFIT. So of course, many of your 80% winners will go on to make 3 points.

you have no edge - your entry is random, your results are down to basic laws of probability.
Click to expand...

With the rep you gave to this post, I now think so :LOL:
 
cpngtw said:
OK, "Mr. Know It All", any serious or seasonal traders MUST know what a WINNING RATE (or RATIO) is, and what a RISK/REWARD RATIO is. Your definition and formula that "links" win rate & risk/reward ratio is lame at best, st***d at worse.

win rate, officially called win/lost ratio, is nothing simpler than a ratio between wining trades vs losing trades over a period of time.

win/lost raion = # winning trades / # losing trades

REGARDLESS of how much money won or lost per trade​

Risk/Reward Ratio = expected risk / expected reward on ONE TRADE​

Win Rate & Risk/Reward Ratio are 2 DIFFERENT variables. The former for a number of trades (let say, 100 trades) over a period of time. The latter is PER TRADE.

If this concept is hard to swallowed, then I'd truely doubt your (boasting) trading experiences and skills

Other readers, if you are new to trading and would like to learn more the basic terms and terminologies, these links would help you much more than listening to the so called "experts" here:

Win/Loss Ratio

Risk/Reward Ratio
Click to expand...

Win rate is aka 'accuracy rate', correct?


Mr. Charts said:
seconded

trade2finind
I don't even have to bother reading pedro's posts to know he'll be talking sense - listen to him.
Click to expand...

Huh? I'm getting confused guys.
 
I think my opinion is pretty clear - pedro talks sense.
I'm so sure I don't even have to read his posts :)
 
Mr. Charts said:
I think my opinion is pretty clear - pedro talks sense.
I'm so sure I don't even have to read his posts :)
Click to expand...

Oh, it's that new thing called 'sarcasm'? I get it now lol. Oh boy, am I in for a ride in this forum. Please have mercy on us newbies. :eek::cry::confused:
 
trade2finind said:
Oh, it's that new thing called 'sarcasm'? I get it now lol. Oh boy, am I in for a ride in this forum. Please have mercy on us newbies. :eek::cry::confused:
Click to expand...

Sarcasm ?!
You asked perfectly reasonable questions and pedro tried hard to be very helpful to you.
When someone else came in attacking him, both zupcon and myself suggested you listen to pedro. I expressed the belief and confidence in pedro that what he advises is so good I didn't even need to read it to know it would be good.
If you think that is sarcasm you have misunderstood something which I thought I'd made clear. No offence or sarcasm was intended.
Just to emphasise this, there are some of us who go out of our way to help people and you have clearly mis-read my intention.
 
Mr. Charts said:
I'll take that as a compliment :)
Click to expand...

Could be :LOL:

Now the serious talk, I didn't understand why some other members didn't like (should I say "hate") you, but now I think there must be some reasons :) I admire the desires you put forward to help, but helping without logical thinking is a disaster and would only stear the people needing help toward the wrong tracks. That indicates in your supposed to be "logical" thinking about blessing some posts without even reading them (n)

Back to the win rate & reward/risk ratio, please prove I'm wrong.
 
trade2finind said:
Huh? I'm getting confused guys.
Click to expand...

OK - let's take this in baby steps.

Try the following

1) Toss a coin at 10:30am every morning.
2) Place a trade on the e-mini S&P. Long for heads, short for tails
3) 3 point stop loss and 3 point target

Over time, your win rate will be 50% (unless you have a REALLY smart coin). Most people can easily see the probability inherent in this. You will break even but suffer from slippage and fees.

Now - look at the following

1) Toss a coin at 10:30am every morning.
2) Place a trade on the e-mini S&P. Long for heads, short for tails
3) 3 point stop loss and 50 point target

Would we reasonably still expect a 50% win rate ? Of course, we still have a 50% chance of heads or tails BUT the odds of the market moving 3 points against before moving 50 points in your favour are not 50:50. In fact, you would win about 5.37% of the time. Over time though - you will not lose any more than in the first example (although 'over time' may blow your account).

So now back to something more realistic

1) Toss a coin at 10:30am every morning.
2) Place a trade on the e-mini S&P. Long for heads, short for tails
3) 3 point stop loss and 6 point target

Is this still going to give us 50% winners, despite what we observed in the second example ? Of course not. It will be more like 33% winners. Still though - you will break even.

Is this clear ? If so - do you see how it relates to what you are trying to do ?

Manipulating these numbers will change the % winners but it may not change the profits.
 
Oh boy!

The Risk/Reward ratio and the winning rate are 2 different variables. Changing Risk/Reward ratio doesn't guarantee an increase or decrease in the winning rate! Period.

Those 2 would be used in a system or method to determine the profitability of such a system or method. Depends on how the system or method is, changing the R/R ratio may INCREASE the winning rate on some systems, but may DECREASE the winning rate on other systems.

Now talking about profitability, those 2 together will say your system or method would survive in the long run or will wipe out your account in no time.
 
yet another "ledgendary member" who completely fails to understand basic expectancy. I shouldnt laugh because its absolutely pitifull, but if evidence is actualy needed that this site has gone to the dogs, there it is in black and white.

you are most definately a ledgend, and already ahead by a country mile for stupidest post of the year, and even in this place where stupidity is the norm, that ones gonna take some beating

:) what a classic
 
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