7.1 How to use and calculate risk/reward ratio for trading | Forex
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http://www.capexforextrading.com/money-management There are many traders who generate more wins than losses but still find themselves in a losing position for the given time period. This is a classic example of money management gone wrong. In other words, they do not calculate and apply the correct risk/reward ratio to their trading strategies. In general terms, a 1:2 risk reward ratio should be used which simply means that your potential reward is two times bigger than your risk. This is the correct way to trade. Professional traders do recommend a 1:3 ratio for obvious reasons but it is up to you and your trading style which ratio you should use. In our video tutorial we describe and analyse an example of how risk/reward should be used but if you have any questions or comments do let us know.
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Risk/reward cannot be viewed in vacuum. it is always related to probability of success. When you trade far OTM iron condors for example, your risk/reward is not good, but you have high probability of success which compensate for low risk/reward.
Take a look: https://steadyoptions.com/articles/risk-reward-or-probability-of-success-r91/ -
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I have a question about a stop loss for example i am now trading GBP/USD which I am very sure will keep going down i haven't set a stop loss because if i did i would lose money. My position can go -10 but then if i wait a bit longer the market becomes more bearish and i can make 5-10
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one win out of two , means 1:1 cause 1+1 = 2
what you wanted to say is one win out of three , one win of 100 and two losses of 50
the problem is that what you whole video is a breakeven goal , not profit in any way,
why is a problem? because if your risking hard earned money to trade forex, your goal is not breakeven, you better go flipping burgers at macdonalds, you have a salary, you dont risk any money and you never breakeven , you are better than brakeven at macdonalds working
trading forex, you need to win big, not breakeven -
HOW TO MINIMIZE TRADING RISKS WITH STOP LOSS TECHNIQUES
http://tradeyodha.com/trade/how-to-minimize-trading-risks-with-stop-losses-part-1/ -
Great tool for fast and easy computations Risk Reward Ratio in MT4/MT5: https://www.mql5.com/en/market/product/5388
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Great explanation, thanks for the video!