Risk Reward ratio for Spread betting

[lightclark]

Hi
I am new to spread betting, and i had been observing my trades for the past 2 weeks and i realised that my Risk Reward ratio doesn't hit 1:2 maybe not even 1:1.5 I am just wondering if the risk reward varies between longer term trading.
Because from looking at the trends, it seems to me that i have to buy at the peak and sell at the bottom to obtain a 1:2 risk reward ratio and also increase the time span, which increase the chance of having large waves which might wash the deposit away.
But doesn't hit the 1:2 ratio if i trade within short time span.
And from observing my trades i realised i dont know how to set profit targets, can anyone give me some advice on setting profit targets too?


I am fairly new to this, hope my questions aren't too dumb
Thanks
Clark

 

[oiltanker]

on fx don't go lower than 1 hr chart

 

[6am]

my Risk Reward ratio doesn't hit 1:2 maybe not even 1:1.5

What is wrong with that? As long as you hit them often enough I do not see the problem.

 

[tomorton]

Agree with 6am. Don't get hung up on ideal pictures of what a great trade should look like. If you have a consistently applied and rational strategy which, rather than good luck or seat-of-the-pants flying, 1:1 r:r is OK: less than that may still work, but it saps the morale when you find you need two winners to make up for one loser.

 

[lightclark]

Thanks very much for your replies, i was just thinking that my r:r was bad according to articles that i read. But i guess its not as bad as i thought now : )
The problem that i believe lies within my trades is that although i can manage to buy it when it is rock bottom, just like today in the Gold market manage to buy in at the double bottom but after i gain a bit i already sold it, do you guys have any advice on how do i know when do i sell it out?

Because today i bought in at 1326 then sold at 1329.5, then it reached 1344 in 2 hours. RSI and stochastics all of it already sayin over bought, so i sold but how should i decide to carry on holding it or not??

 

[tomorton]

I trade repeating patterns that I know from past performance and back-testing usually travel so far. When they get there I get out. Don't trust indicators.

 

[oiltanker]

you never know how far it goes which is why people close half and leave the rest to run. or trailing stop.
longer timeframe gives you the big picture.

 

[Mata Nui]

I was using a 1:1.5 but found on some days i would see a lot of trades getting close but reversing to SL. Because its not too far off a scalping trade i found moving the stop to BE killed the hit rate. Now i have changed the entry to be more aggressive and moved the ratio to 1:1. The result is very similar in totals end of week but the hit rate is miles better.

I know most people would say a few long trades with a better RR is more responsible than many small trades at 1:1 but for me the hit rate has a massive psychological benefit. I am new to this game as well but from what i can tell its all about psychology. For me a high hit rate with a low risk, low reward makes me feel a lot more comfortable about what i am doing.

At the end of the day if the way you trade is making you money and you are confident trading it then you have your edge.

 

[montmorencyt2w]

Hi
I am new to spread betting, and i had been observing my trades for the past 2 weeks and i realised that my Risk Reward ratio doesn't hit 1:2 maybe not even 1:1.5 I am just wondering if the risk reward varies between longer term trading.
Because from looking at the trends, it seems to me that i have to buy at the peak and sell at the bottom to obtain a 1:2 risk reward ratio and also increase the time span, which increase the chance of having large waves which might wash the deposit away.
But doesn't hit the 1:2 ratio if i trade within short time span.
And from observing my trades i realised i dont know how to set profit targets, can anyone give me some advice on setting profit targets too?


I am fairly new to this, hope my questions aren't too dumb
Thanks
Clark

As others have said, don't get hung up on a particular risk:reward ratio. In any case, some people define it slightly differently. For example, I have seen Trader_Dante (a genuine legend around these parts) say something like, he measures risk by the actual drawdown of the trade when it's running. Measured that way, you might find your ratio is a lot better than you thought (if you are good at choosing entry points).

Similarly, don't get too fixated on profit targets. If you are shooting for 50 pips, but you can see the move is exhausted after 41 pips, take the profit and run! (Depending on your time-frame and style, of course). How do you know the move is exhausted? Well, that's another story, and many other threads, but basically, it comes with experience. However, using common sense helps, and think of it as a balance of probabilities.

Good luck. Try not to get too carried away when you win, or too depressed when you lose, and above all, try to have a bit of fun along the way.