2:1 trading system

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I have a trading system but it works when risk is 2 and then it gives reward of 1

It's a strange problem because even if system accuracy is high but I know that to grow account we must use minimum 1:2 trading system where risk is 1 and reward should be 2 or more 

So can you please suggest me what maths and probability or money management I can use so I can still be profit with that system where I risk 2 for reward of 1


 
Arpit T:
I have a trading system but it works when risk is 2 and then it gives reward of 1

It's a strange problem because even if system accuracy is high but I know that to grow account we must use minimum 1:2 trading system where risk is 1 and reward should be 2 or more 

So can you please suggest me what maths and probability or money management I can use so I can still be profit with that system where I risk 2 for reward of 1


I think there is no rule as such Risk/Reward=1/2

suppose your risk is 10 and your reward is 1.

and win rate=99%

out of 100 trades you win 99 times 1=+99

out of 100 trades you loose 1 times -10=-10

in total you are in profit of +89

 
Yashar Seyyedin #:

I think there is no rule as such Risk/Reward=1/2

suppose your risk is 10 and your reward is 1.

and win rate=99%

out of 100 trades you win 99 times 1=+99

out of 100 trades you loose 1 times -10=-10

in total you are in profit of +89

Even if accuracy is 99% then we make human errors. I use mt5 for some indication which helps me 60%, 40% time I have to use my own brain so it's highly likely that human error will be 20% or more and since sl would be strict, it makes  losing chances high so I am looking for solution of any money management or other method which can work for this system. 

I blown up my account many times when I traded without stoploss . A single candle of 1min chart taken out months of profit 

Then i learnt to trade with stoploss almost 4 years ago and then i blown up account using stoploss too .. due to invalid risk management 

Then i learnt risk management and blown up account many times but very slowly like in months .. it was definitely an improvement

But now I knew every system works with stop loss. Martingale like method i stay away and don't use.

Thanks
 
Arpit T #:
Even if accuracy is 99% then we make human errors. I use mt5 for some indication which helps me 60%, 40% time I have to use my own brain so it's highly likely that human error will be 20% or more and since sl would be strict, it makes  losing chances high so I am looking for solution of any money management or other method which can work for this system. 

I blown up my account many times when I traded without stoploss . A single candle of 1min chart taken out months of profit 

Then i learnt to trade with stoploss almost 4 years ago and then i blown up account using stoploss too .. due to invalid risk management 

Then i learnt risk management and blown up account many times but very slowly like in months .. it was definitely an improvement

But now I knew every system works with stop loss. Martingale like method i stay away and don't use.

Thanks

You are welcome... in fact your question is the million dollar question. I would not share if I knew the answer.

 
Arpit T #:
Even if accuracy is 99% then we make human errors. I use mt5 for some indication which helps me 60%, 40% time I have to use my own brain so it's highly likely that human error will be 20% or more and since sl would be strict, it makes  losing chances high so I am looking for solution of any money management or other method which can work for this system. 

I blown up my account many times when I traded without stoploss . A single candle of 1min chart taken out months of profit 

Then i learnt to trade with stoploss almost 4 years ago and then i blown up account using stoploss too .. due to invalid risk management 

Then i learnt risk management and blown up account many times but very slowly like in months .. it was definitely an improvement

But now I knew every system works with stop loss. Martingale like method i stay away and don't use.

Thanks
No matter where SL is, you should risk the same amount every trade… SL 10 pips, you risk 10$, SL 100 pips you risk also 10$. So your LotSize should be different for every SL distance, to risk the same amount of money on every trade, 
 
Daniel Cioca #:
No matter where SL is, you should risk the same amount every trade… SL 10 pips, you risk 10$, SL 100 pips you risk also 10$. So your LotSize should be different for every SL distance, to risk the same amount of money on every trade, 

its not about risking, if i risk 10 pips no matter what, but reward always remains 5 pips, so how to win?

 
Arpit T #:

its not about risking, if i risk 10 pips no matter what, but reward always remains 5 pips, so how to win?

If your system has a ratio of R:R 2:1, then your win rate must be above 68% to be profitable in the long term (not including spreads and commissions).

 
Arpit T:
I have a trading system but it works when risk is 2 and then it gives reward of 1

It's a strange problem because even if system accuracy is high but I know that to grow account we must use minimum 1:2 trading system where risk is 1 and reward should be 2 or more 

So can you please suggest me what maths and probability or money management I can use so I can still be profit with that system where I risk 2 for reward of 1


If the current profit of the position reaches half of the desired profit, close partially the position with the volume of 50%. This reduced the risk of leaving without gaining anything. 

 
Tiofelo Da Olga Gilbert Teles #:

If the current profit of the position reaches half of the desired profit, close partially the position with the volume of 50%. This reduced the risk of leaving without gaining anything. 

Thanks, would try this

 
Arpit T:
I have a trading system but it works when risk is 2 and then it gives reward of 1

It's a strange problem because even if system accuracy is high but I know that to grow account we must use minimum 1:2 trading system where risk is 1 and reward should be 2 or more 

So can you please suggest me what maths and probability or money management I can use so I can still be profit with that system where I risk 2 for reward of 1


Hi there,

Although your question directly relates to a (mechanical) trading system, and its potential for profitability or otherwise, there are several aspects to your initial written query which suggests considerable lack of understanding across multiple aspects of consideration. And as such, it is hoped that the following would guide you in a more favourable direction.

Firstly, there is no universally applicable rule which dictates that one must apply a trading system in which risk to reward is 1:2. In fact there are many professionals (particularly in stocks and forex trading) who make use of trading techniques (note I avoided the word ‘system’, thus implying it has been developed over time) that have the potential of costing them 2x or more (on a losing side) of what they would gain if the trade goes in their favour. And many of them are very possible. You see, they are able to trade that way because they understand (amongst a few other considerations) risk management, money management, and the relationship between time and distance.

Now, in considering probabilities alone, one has greater odds of a trade reaching a shorter distance target, than one reaching a longer distance target; that is because certainty exists closer to now: and not in the future! You see, if I asked you what you’d be doing in the next five minutes, or thirty minutes, or even one hour from now, you are likely to give me an answer with a high degree of certainly. But if I asked you what you would be doing at 1:00pm four to six days from now, you would not be able to answer with a high degree of certainty.    

So, with the aforementioned in mind, it is important to note that professionals only act on what they know, and what is highly probable. And probability is highest when the distance between a current state and a desired state is management. That is why many professionals would commit large amounts of capital when they expect to be in a trade for a short period of time, and smaller amounts when they expect to be in a trade for longer than they can afford to risk.

Professionals seek accuracy, whilst novices seek assurance and security. Many professionals will take trades with 1:1, 2:1, and even 3:1 (whatever the market provides that their skills can capitalize upon). Some novices on the other hand are seeking trades of 1:4 or higher. But trades of 1:4 come a lot fewer than those of 1:1. A trader should only solely dwell on high reward to risk ratios if one’s accuracy is less than 50%.

I suspect you’re a Johnny come lately to forex trading. And if such is true, you need focus less on trading profits at this point in time, and more on developing as a trader. I recommend you read the trading blog post below as it will give you a clearer idea of your current stage of trader development, and how to grow from there. Best of luck.

 
Arpit T:
I have a trading system but it works when risk is 2 and then it gives reward of 1

It's a strange problem because even if system accuracy is high but I know that to grow account we must use minimum 1:2 trading system where risk is 1 and reward should be 2 or more 

So can you please suggest me what maths and probability or money management I can use so I can still be profit with that system where I risk 2 for reward of 1


Hi, if your risk/reward is 2:1, you'll need a success rate of 70% to BE. I don't think there are many professional traders achieving these results though.

If I may, rather develop a strategy with a 1:2 or 1:3 risk/reward and learn to let winners run. Don't get stuck with fixed TP's, because different market conditions bring different opportunities to profit. the same goes for your SL, sometimes you would have to decrease your lot size to be able to survive volatile market conditions without compromising draw down. Stick with 2 to 3 trades per day and stop trading after 2 consecutive losers.

Trade safe.

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