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Re: Why we are taught to set risk/reward ratio larger than 1
to overload:
My suggestion to beginners is to take signals as soon as possible. While risk reward is definitely important, I think it's not the key concern.
The reason is once signals are given, it is very easy to identify when you are wrong. What this means is your risk is very small...
In the example you gave.. if a signal was generated at 1.1685, I would not take the trade if it was trading at 1.17 presonally. While 1:3 is still good, I always look for higher reward/risk ratios because I realise that I AM WRONG MOST OF THE TIME!!
My trading statistics show me I am wrong about 55-60% of the time, yet I am profitable. Obviously my wins have to be huge.
For example, I trade the aud/usd pair a lot, and my average losing trade is a loss of 16 pips, which is apparently really low.
Just something to think about.. not necessarily something that suits your trading style
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