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Riskrewardratio

Silver Bullet Strategy EURUSD AUDUSD | 03/12/2024Trading the Silver Bullet strategy was tough yesterday. While many may only discuss the wins associated with their trading strategies, we encountered some losses yesterday. We entered two trades on two major currency pairs (EURUSD, AUDUSD) and aim to walk you through what happened during our trading session using the Silver Bullet strategy. At 10:00 EST, we began scouting for potential trading setups, as this marks the beginning of the Silver Bullet window, which concludes at 11:00 EST. By 10:20 EST, a Fair Value Gap (FVG) had formed on the EURUSD currency pair, presenting us with a sell bias and directing our attention to potential selling opportunities in EURUSD for the current trading session. Upon reviewing AUDUSD, we observed that an FVG had also formed at 10:20 EST, further indicating a sell bias for the currency pair. Once we establish a bias, we typically wait for a retracement into the formed FVG and only execute the trade after the candle that enters the FVG has closed. This step is crucial on our checklist because our backtesting revealed scenarios where the candle entering the FVG could proceed to hit the stop loss. This check helps us avoid entering trades under such conditions. Meanwhile, those who use limit orders may find themselves at a disadvantage in these situations. After a 20-minute wait following the formation of the FVG, we identified a trade on EURUSD that satisfied all the criteria on our checklist, and without hesitation, we proceeded to execute the trade. In this trade, since the high of candle number 1 from the entry price is approximately 7 pips, which does not satisfy the minimum stop loss requirement, we adjust it to a 10 pips stop loss, our minimum threshold. This rule ensures the trade has sufficient room to fluctuate. Immediately after executing the EURUSD trade, we identified another opportunity with AUDUSD that met all the criteria on our checklist. As it fulfilled the necessary requirements, we proceeded without hesitation to execute the trade. Please be aware that we risk 1% of our trading account on each trade. This level of risk is acceptable for us, as it's an amount we're comfortable with potentially losing, thus preventing emotional attachment to the trades. Ten minutes after initiating a sell position on EURUSD, our trade reached the stop loss, resulting in a 1% loss for the day. Consequently, we are left with our sell position on AUDUSD. After incurring a loss on EURUSD, we examined the AUDUSD position and found that this trade was also facing a drawdown. Did we experience any emotions upon realizing we might lose 2% that day? No, because we had already accepted the risk and were prepared for any outcome, whether it was a win or a loss. We were aware that the strategy's win rate was around 48%, indicating that losses are a part of the process. However, with a positive risk-to-reward ratio, our wins are expected to outweigh the losses. While awaiting the outcome of the AUDUSD trade, we noticed a setup on USDCAD where a Fair Value Gap (FVG) had formed. However, upon closer inspection, we realized it materialized exactly at 11:00 EST. This timing meant we couldn't engage in the trade, as our checklist mandates that trades must be executed before 11:00 EST, thus invalidating this setup. It's important to note our discipline here; despite the temptation, we didn't enter another trade out of revenge. Instead, we let it pass because it failed to meet certain criteria on our checklist. Discipline is a crucial quality of a successful trader and should never be underestimated. Upon reviewing the AUDUSD trade once more, we observed that it was no longer in a drawdown; instead, the trade had returned to our entry price. Consequently, there was no action required other than to allow the trade to proceed as it will After being in the trade for an hour and 10 minutes, the AUDUSD position hit the stop loss, putting us down 2% for the day. Indeed, we took two losses and it's likely we'll face more, as that is the nature of trading. It's normal to encounter multiple losses throughout your trading career, and it's crucial not to let them discourage you. Ensure that any strategy you use has been thoroughly backtested and has the data to support its long-term profitability. Also, make certain that your wins consistently exceed your losses, so that during a losing streak, just a few wins can compensate for the losses.
Education
by CleoFinance
1
Never Risk What You Can't Afford to Lose When it comes to trading whether you're in crypto, stocks, forex, or any other market—the most important rule is: 'Never risk more than you can afford to lose'. This is the foundation of successful trading and critical to long-term sustainability in the markets. In this idea, I'll break down why this principle is so crucial and how to apply it effectively to your trading strategy. Why is it so important? Trading is all about managing risk. The markets, particularly crypto, can be extremely volatile, where sharp price movements are common. While volatility can create big opportunities, it also introduces significant risk. Without a proper risk management strategy, a single bad trade could wipe out a large portion—or even all—of your capital. If you're trading with money you can't afford to lose, you're putting yourself in a dangerous position, both financially and emotionally. It may cause you to: Trade with fear: When you're overly concerned about losing money, your decision-making becomes clouded. You may hesitate to execute a solid strategy or exit a trade too soon out of panic. Trade with greed: Conversely, you may take unnecessary risks hoping for a quick win, leading to even bigger losses. Lose control: If your losses are too large, you may be tempted to "chase" those losses by taking on even riskier trades in an attempt to recover, which often backfires. How to apply this principle in your trading 1. Determine Your Risk Capital: Risk capital is the amount of money you’re willing to lose without it negatively impacting your financial situation or lifestyle. This is critical because trading should never involve money meant for essential expenses (rent, bills, education, etc.). The amount of risk capital will vary for everyone based on their financial situation and risk tolerance. Remember, trading with money you can’t afford to lose leads to stress and poor decision-making. 2. Use the 1-2% Rule for Position Sizing: One of the most effective ways to control risk is to apply the 1-2% rule. This means never risking more than 1-2% of your total capital on any single trade. For example, if your trading account is $10,000, you should only risk $100 to $200 per trade. This small risk per trade ensures that even a series of losing trades won’t severely impact your overall account. It’s about staying in the game, as even the best traders experience losses. 3. Set Stop-Loss Orders on Every Trade: Using a stop-loss is one of the most practical tools to limit potential losses. A stop-loss order automatically closes your trade if the market moves against you, protecting you from excessive losses. It's crucial to place stop-losses at logical levels based on technical analysis, rather than random percentages. This ensures you're exiting trades when the setup has failed, not just due to minor market fluctuations. For example, if you're buying Bitcoin at $30,000, and your analysis shows that support is at $29,500, you might set your stop-loss slightly below that level, ensuring your downside is protected. 4. Risk/Reward Ratio: Always assess the risk/reward ratio before entering a trade. The risk/reward ratio measures how much you're risking to achieve a potential reward. A commonly used ratio is 1:2, meaning for every $1 you're risking, you're aiming to make $2. This approach ensures that even if you're wrong on half of your trades, you can still be profitable in the long term. By ensuring that your potential profit is always greater than your potential loss, you create a solid balance of risk management. 5. Leverage: A Double-Edged Sword In crypto and other financial markets, leverage can amplify both gains and losses. While leverage can increase your buying power, it also multiplies the risk. For example, using 10x leverage means that a 10% adverse move could wipe out your entire position. If you use leverage, make sure you do so cautiously. Low leverage (such as 2x-3x) is generally safer and allows you to better manage your risk without being exposed to devastating losses. 6. Diversify Your Positions: Diversification is another key component of risk management. Don't put all your money into a single trade or asset. Spread your capital across multiple trades or cryptocurrencies to minimize exposure to one particular asset’s performance. This way, if one trade or asset doesn’t go as planned, the others might still perform well, balancing out your risk. 7. Avoid FOMO and Emotional Trading: Fear of missing out (FOMO) is one of the most common emotional traps in trading. Jumping into a trade just because the market is skyrocketing often leads to bad decisions and, ultimately, losses. Stick to your plan and make decisions based on analysis, not emotions. Remember, the market will always present new opportunities. 8. Plan for Losses: Losses Are Part of Trading: Even the most successful traders incur losses—it's an inevitable part of trading. The goal isn’t to avoid losses altogether but to manage them effectively. Knowing when to cut losses and move on is crucial. Every trade should have a plan, including both the target profit and the acceptable level of loss. Your number one priority as a trader is to protect your capital. Always remember that preserving your capital is the key to staying in the market long enough to find those winning trades. Risking money you can’t afford to lose leads to poor decision-making, emotional trading, and ultimately failure. By limiting your risk on every trade, using stop-losses, maintaining a balanced risk/reward ratio, and managing leverage, you can ensure that you're trading responsibly and in control of your long-term success. Regards Hexa
OANDA:XAUUSDEducation
by HexaTrades
2
Why Smart Traders Trust the Risk-to-Reward Ratio!Risk Reward Ratio In the world of trading, profit potential alone doesn't define success. More important than chasing profits is understanding and managing risk. This is where the Risk-to-Reward Ratio becomes a vital component of every trading strategy. Traders who ignore this concept often find themselves on the losing end, even when they win more trades than they lose. On the other hand, those who master the art of managing their risk relative to their potential reward tend to find consistent success over the long run. In this idea, we'll explore why the Risk-to-Reward Ratio is crucial, how to calculate it, and why traders should prioritize it for sustainable profitability. What is the Risk-to-Reward Ratio? The Risk-to-Reward Ratio compares the amount of risk a trader takes on in a trade (the potential loss) to the potential reward (the possible gain). Simply put, it tells you how much you're risking for every dollar you're aiming to make. For example, if you're willing to risk $100 on a trade but expect a potential reward of $300, your R ratio is 1:3. This means for every $1 you're risking, you aim to make $3. How to Calculate the Risk-to-Reward Ratio: Determine the Risk: This is the distance between your entry price and your stop-loss level. Determine the Reward: This is the distance between your entry price and your take-profit level. The formula is: Risk to Reward Ratio = Potential Profit/Potential Loss Why is the Risk-to-Reward Ratio So Important? Maintains Profitability Despite Losses: No trader can win 100% of the time. A favorable R allows profitability even with a low win rate. For instance, with an R of 1:3, winning just 25% of your trades can break you even. Limits Emotional Trading: Emotional decisions often lead to poor trading choices. A clear R helps enforce discipline, making it easier to adhere to your trading plan and reducing impulsive actions based on fear or market fluctuations. Improves Trade Selection: Not every trading opportunity is worth taking. A favorable R encourages selectivity, focusing on trades that offer high potential returns relative to risk. This helps eliminate low-quality trades, leading to a more profitable strategy. Balances Risk and Reward: Finding the right balance between risk and reward. A favorable R ensures you’re not risking too much for too little gain, allowing winning trades to cover losses over time. Improves Long-Term Consistency: A solid R creates a sustainable trading system. Maintaining discipline and risking only a small percentage of your capital helps protect your account during losing streaks. Combined with a strong strategy, this fosters a reliable edge in the market. Risk-to-Reward Table and Breakeven Win Rates To understand how different R ratios affect your breakeven point, let's look at the table below. It shows the win rate required to break even, based on different Risk-to-Reward ratios. ​https://www.tradingview.com/x/5GZcSrlz/ -if your R ratio is 1:1, you need to win 50% of your trades just to break even. -With a R ratio of 1:3, you only need to win 25% of your trades to break even. -A higher risk-to-reward ratio reduces the pressure to win more trades because when you do win, your reward is significantly larger than the risk you took. This table highlights the power of having a higher R ratio. Even if your win rate is low, you can still remain profitable as long as your winners significantly outweigh your losers. Examples of Risk-to-Reward in Real Trading Let’s say you're considering a long trade on Bitcoin. Your analysis shows the entry price should be $64,000, with a stop-loss at $62,500 (a $1,500 risk). Your target price is $68,000, giving you a potential profit of $4,000. Risk: $1,500 Reward: $4,000 Risk Reward Ration = 1500/4000 = 2.67 In this case, your R ratio is 1:2.67, meaning that for every $1 you risk, you aim to make $2.67. If you only won 30% of your trades, you could still be profitable over the long term because of the higher reward relative to your risk. Mastering the Risk-to-Reward Ratio is essential for traders seeking long-term success. By understanding and implementing this concept, traders can effectively manage risk, improve trade selection, and maintain profitability, ensuring a more sustainable approach to trading. Regards Hexa
COINBASE:BTCUSDEducation
by HexaTrades
2
S&P500 - Week 35 Recap and Takeaways This week was full of twists and surprises in the stock market. We managed to execute three trades, all of which ended in profit, but there were some key lessons to carry forward into next week. Let's dive into the rollercoaster that was Week 35. 1. The Bulls Lost the Fight for a Breakout Our initial Plan A was geared toward a bullish breakout above the blue resistance level, with hopes of reaching a new all-time high (ATH). However, the market had other plans. As soon as the index dipped below the VWAPs with strong volume, our Plan B automatically kicked in. 2. Trade 1 - Initiating Plan B As we outlined last weekend, our backup plan was to look for a 4-star bearish setup between the key zones (blue and green). The idea was to enter a short trade if the RVOL was greater than 3 and the market dipped below VWAP1 and VWAP2, provided the risk/reward (R/R) ratio was in our favor at a minimum of 1.7. This setup unfolded perfectly on Monday. We entered the trade, but as the price paused at an R/R ratio of 1.5, we decided to take 50% off the table, move our SL to the entry level, and let the market decide the rest. Although we aimed for a TP2 at an R/R ratio of 2.5, the price didn't drop that low and started a comeback later in the day. When the intraday downtrend broke near the end of the session, we closed Trade 1, netting a realized R/R ratio (r) of 0.885. Given the shaky conditions, we were happy to walk away with clear signals and a modest profit. 3. Understanding R/R Ratio(e) vs. R/R Ratio(r) Both estimated (e) and realized (r) R/R ratios are crucial in trading. Success in trading isn't just about estimating potential gains but also about tracking what you actually realize. This distinction is vital, especially during back-testing, as it separates profitable traders from those who break even or worse. 4. Trade 2 - The Day Before NVIDIA’s Quarterly Report On Wednesday, NVIDIA released its quarterly report after the NY exchange closed, and the results fell short of market expectations. The day started below VWAP with high RVOL, which matched our criteria for another short trade. We again set our TP in two stages—TP1 at an R/R ratio of 1.5 and TP2 at 2.5, as the market confirmed a new intraday downtrend. This trade played out perfectly, with both the estimated and realized R/R ratios matching. Some might wonder why we closed the trade even with strong momentum. The answer lies in the green long-term bullish trend line. We placed our final TP just above this line, anticipating support in that area, which is exactly what happened. The market bounced back just before the end of the day, and we closed out the trade before NVIDIA’s report was released. The risk of holding on for more was simply too high. 5. Trade 3 - The Day After NVIDIA After NVIDIA’s report, the S&P 500 dipped below the long-term trend line during the Asian session, but by the time the London session began, the price was fighting back. With RVOL greater than 3 and the index reclaiming VWAP1 and VWAP2, we entered another short trade with an estimated R/R ratio greater than 1.7. This trade also hit both of our TPs, and we exited just as the market approached the blue resistance zone. 6. Were There More Setups This Week As we reviewed the week, we found that no additional trades aligned with our strategy. On Tuesday, the market bounced back from VWAP with high RVOL but didn’t offer a favorable R/R ratio. On Thursday, RVOL was below 3 during a potential setup, and on Friday, despite strong RVOL, the R/R ratio was again too low. Later on Friday, the market surged, but low RVOL kept us on the sidelines. Conclusion The key takeaway from this week is the importance of patience and discipline. It’s crucial to sit on your hands when not all your rules are checked. Even if the trade you didn’t take would have worked out, letting your ego guide your trading decisions can be a trap. Your ego might remember that one missed opportunity and push you to take the next trade without all your criteria being met, but that’s a recipe for disaster. Sticking to your trading rules is like maintaining trust in a relationship. Ignoring your rules is akin to cheating; it might be thrilling at first, but it will eventually lead to more pain than gain. So, stay calm, trust your process, and let the market create the trade for you, not the other way around. We hope this update adds real value as you continue to navigate the markets this week. Stay disciplined, patient, and focused on making smart, strategic trades! Can’t Get Enough? Don’t Miss Out! Subscribe to stay updated on all our latest trading ideas and strategies. Share your thoughts in the comments, and let’s build a community of traders who are committed to learning, growing, and succeeding together. Your journey to market mastery is just beginning, and we’re here to guide you every step of the way! What You’ll Learn: - In-depth market analysis - Proven trading setups - Effective risk management techniques - The importance of discipline in trading - How to adapt to changing market conditions - And much more!... Best wishes, TradingMasteryHub
OANDA:SPX500USD
by TradingMasteryHub
How To Use RISK vs. REWARD RatiosHi Traders, Investors and Speculators 📈📉 Ev here. Been trading crypto since 2017 and later got into stocks. I have 3 board exams on financial markets and studied economics from a top tier university for a year. Daytime job - Math Teacher. 👩🏫 For today's post, we're diving into the concept " risk reward ratio " by taking a look at practical examples and including other relevant scenarios of managing your risk. What is considered a good risk to reward ratio and where can you see it ? This applies to all markets, and during these volatile times it is an excellent idea to take a good look at your strategy and refine your risk management. Let's jump right in ! You've all noticed the really helpful " long setup " or " short setup " on TradingView chart ideas. This clearly identifies the area of profit (in green), the area for a stop-loss (in red) and your entry (the borderline). It also shows the percentage of your increases or decreases at the top and bottom. This is achieved by using the tool you can find in your toolbar on the left, 7th from the top. The first two options are Long Position and Short Position. It looks like this : 💭Something to remember; It is entirely up to you where you decided to take profit and where you decide to put your stop loss. The IDEAL anticipated targets are given, but the price may not necessarily reach these points. You have that entire zone to choose from and you can even have two or three take profits points in a position. Now, what is the Risk Reward Ratio expressed in the center as a number.number ? The risk to reward ration is exactly as the word says : The amount you risk for the amount you could potentially gain. NOTE that your risk is indefinite, but your gains are not guaranteed . The risk/reward ratio measures the difference between the entry point to a stop-loss and a sell or take-profit point. Comparing these two provides the ratio of profit to loss, or reward to risk. For example, if you're a gambler and you've played roulette, you know that the only way to win 10 chips is to risk 5 chips. Your risk here is expressed as 5:10 or 5.10 .You can spread these 5 chips out any way you like, but the goal of the risk is for a reward that is bigger than your initial investment. However, you could also lose your 5 and this will mean that you need to risk double as much in your next play to make up for your loss. Trading is no different, (except there is method to the madness other than sheer luck...) Most market strategists and speculators agree that the ideal risk/reward ratio for their investments should not be less than 1:3, or three units of expected return for every one unit of additional risk. Take a look at this example: Here, you're risking the same amount that you could potentially gain. The Risk Reward ratio is 1, assuming you follow the exact prices for entry, TP and SL. Can you see why this is not an ideal setup? If your risk/reward ratio is 1, it means you might as well not participate in the trade since your reward is the same as your risk. This is not an ideal trade setup. An ideal trade setup is a scenario where you can AT LEAST win 3x as much as what you are risking. For example: Note that here, my ratio is now the ideal 2.59 (rounded off to 2.6 and then simplified it becomes 1:3). If you're wondering how I got to 1:3, I just divided 2.6 by 2, giving me 1 and 3. Another way to express this visually: If you are setting up your own trade, you can decide at what point you feel comfortable to set your stop loss. For example, you may feel that if the price drops by more than 10%, that's where you'll exit and try another trade. Or, you could decide that you'll take the odds and set your stop loss so that it only triggers if the price drops by 15%. The latter will naturally mean you are trading at higher risk because your risk of losing is much more. Seasoned analysts agree that you shouldn't have a value smaller than 5% for your stop loss, because this type of price action occurs often during a day. For crypto, I would say 10% because we all know that crypto markets are much more volatile than stock markets and even more so than commodity markets like Gold and Silver, which are the most stable. Remember that your Risk/Reward ratio forms an important part of your trading strategy, which is only one of the steps in your risk management program. There are many more things to consider when thinking about risk management, but we'll dive into those in another post. _______________________ 📢Follow us here on TradingView for daily updates and trade ideas on crypto , stocks and commodities 💎Hit like & Follow 👍 We thank you for your support ! CryptoCheck
Education
by CryptoCheck-
35
Understanding the Profitability of Trading.In the trading world, there are various methods to make money. However, in the fundamental approach to trading itself to earn money, we need to know that it has to be when you win bigger and lose smaller. Then, you might think about whether you should focus on winning more often or bigger. This article explores how to assess the profitability of the trading system with a simple formula. Winning Rate and Risk-Reward Ratio Two crucial factors affecting a trading signal's profitability are the winning rate and the risk-reward ratio. The winning rate is the percentage of trades that turn a profit. A high winning rate can mean steady profits, but it doesn't guarantee overall profitability. The risk-reward ratio is the relationship between potential gains and losses in a trade. A higher risk-reward ratio can lead to bigger profits, but it also demands a higher rate of correctness to stay profitable. How They Impact Profitability Let's use a simple example to understand how these factors affect profitability. Imagine a trading signal with a 60% winning rate and a risk-reward ratio of 2:1. This means for every $1 risked, the potential profit is $2. If applied to 100 trades with a $100 risk per trade, the total risk is $10,000. Winning 60 trades would yield $12,000 in profit while losing 40 would result in a $4,000 loss. The net profit in this case would be $8,000. This illustrates how the winning rate and risk-reward ratio impact a trading signal's profitability. Evaluating Signal Effectiveness To gauge the effectiveness of a trading signal, you need to consider a few factors. Firstly, backtest the signal using historical data to assess its performance(Minimum 100 trading signals). Ensure the backtesting period covers various market conditions. Secondly, forward test the signal using real-time data to evaluate its live performance. Finally, assess the signal's consistency and reliability over time(Real-time experience is different from backtesting). Signals that consistently generate profits are more reliable. Key Aspects for Profitability When assessing a trading signal's profitability, focus on a high winning rate and a favorable risk-reward ratio. The signal should adhere to sound trading principles, avoiding subjective factors for consistency and reliability. The formula for Winning Rate and Risk-Reward Ratio Here are simple formulas to calculate the winning rate and risk-reward ratio: Winning rate = (Number of winning trades / Total number of trades) x 100 Risk-reward ratio = (Average profit per trade / Average loss per trade) The higher these values are, the greater the potential for earning money through trading. However, having high values in isolation isn't enough for profitable trading. Let's delve into a few examples to fully grasp this concept: Example 1: Consider Person A , who has a stellar winning rate of 90%, yet a risk-reward ratio of a meager 0.1. Now let's ask, will this individual amass wealth or rack up losses? With his current risk-reward ratio, when luck favors, Person A walks away with a hefty $1,000. However, when faced with defeat, he incurs a significant loss of $10,000! Their trading pattern? Win 9 times with a total earnings of $9,000, only to lose a much larger sum of $10,000 later. While this strategy may appear profitable in the short-run, it's unsustainable in the long-run, often resulting in accumulating losses. Example 2: Now, let's consider another scenario. Person B , with a winning rate of only 10% but a remarkable risk-reward ratio of 8. The same question arises - will this person amass wealth or rack up losses? With their risk-reward ratio, when placed in favorable circumstances, Person B earns an impressive $8,000. Conversely, a bad day costs them a $1,000 loss. Now, their trading pattern may seem paradoxical. They win once, earning a massive $8,000, then lose 9 times in a row for a total loss of $9,000. Despite the high-risk reward ratio, the low winning rate fails to buoy their profits. Ultimately making it a non-profitable strategy. Determining Profitability To assess whether you can make money based solely on the winning rate and risk-reward ratio, consider a formula called the required winning rate. It's defined as: Required Winning Rate = 100 / (Risk-Reward Ratio + 1) Let's look at two examples: Person A has a 90% winning rate and a risk-reward ratio of 0.1. The required winning rate is 100 / (0.1 + 1) = 90.91%. Person A needs to maintain a winning rate of 90.91% to break even. Person B has a 10% winning rate and a risk-reward ratio of 8. The required winning rate is 100 / (8 + 1) = 11.1%. Person B must achieve an 11.1% winning rate to avoid losses. This formula helps determine the minimum winning rate needed to profit based on a strategy's risk-reward ratio. It emphasizes that both factors are critical for trading success. If the required winning rate isn't met, it may be wise to pause and further study the markets. Assessing the profitability of a trading signal is essential for successful trading. Consider the winning rate, and risk-reward ratio, evaluate the signal's effectiveness, and emphasize key aspects. Use the required winning rate formula to understand the minimum winning rate needed for profitability. By making informed decisions, traders can improve their chances of consistent profits over time. Follow and Boost for your financial success ! Write your thoughts in the comment section.
by Wealthy_Stats
Frying Golden NuggetsProgramming the mind to follow my plan every day is challenging. In order to secure a future as a trader, I must follow my own rules. Today I was able to capitalize on my principles, and I like to share it today. I was able to secure profits, by planning a day ahead. Price already rejected to this area yesterday. This is also the lowest low OANDA:NAS100USD formed. I am managing to stick to my trading plan little by little. A major lesson I have learned is to allow the price target to mature. This trade was triggered in my sleep. My main lesson is to go with my gut when determining when to get out. As you can see, in USA session, the price started to retrace shortly after ten thirty am. My most profitable trades come from going with the trend. But in this particular trade, I went against the trend and entered a break of structure. It was a good 1:6 risk-reward ratio. For The First Time This Week, I am witnessing a potential exhaustion of a bullish trend. If the price stays below the white line, we are looking for short positions in the future. If the price breaks above the white line, we are looking for long positions! In conclusion, I'd like to share my trading journal entry.. DID I FOLLOW MY PLAN? Yes. I exercised Break Of Support ALLOWED the price to hit your entry poiint CLOSED THE TRADE IN SESSION. WHAT DID I DO WELL? 1. Identified Trend Exhaustion in Previous Session. 2. Stuck To My Trading Plan by entering at break of support.. 3. Exercised good risk management, by setting a stop loss. WHAT CAN I DO BETTER? 1. Set a Higher Lot Size. Double Down 2. Allow the trade to cook until I see potential trend exhaustion.. WHAT DID I LEARN? 1. Following My Plan Is Profitable 2. Using One Simple Strategy Is Okay To Increase My Success 3. How To Enter The Market At A Break Of Support DID I PREPARE PROPERLY? YES, I entered a trade in my session with confidence with several of my confluences in my technical analysis. This time I set my price at support, and wait for a confirmation. The Small Wins Count. Your subconscious mind will be simply impressed
OANDA:NAS100USDShort
by Cashflowmarcofx
Risk Reward Ratio ExpainedThe key to becoming successful as a Forex trader is to find the right balance between how much you risk per trade to achieve the desired profit you are aiming for. This balance needs to be realistic and relevant to the technical strategy you are applying. You need to combine risk reward with your strategy. The risk-reward ratio is simply a calculation of how much you are willing to risk in a trade, versus how much you plan to aim for as a profit target. To keep it simple, if you were making a trade and you only wanted to set your stop loss at five pips and set your take profit at 20 pips, your risk reward ratio would be 5:20 or 1:4. You are risking five pips for the chance to gain 20 pips. The basic theory for the risk-reward ratio is to look for opportunities where the reward outweighs the risk. The greater the possible rewards, the more failed trades your account can withstand at a time. When it comes down to it, it is up to you as a trader to figure out what type of risk-reward ratio you want to use. You should try to avoid having your risk be bigger than your reward, particularly if you are a beginner, but there is no particular ratio that works for all traders. The important thing is that you use a ratio that makes sense for your trading style and for market conditions! I recommend to use 1:2 risk reward ratio. Have a great day 📊
FOREXCOM:XAUUSDEducation
by SanShone
The Power of Risk Management 💪 How Can Being an Average Analyst Lead to Profits? The Power of Risk Management and Risk Percentage Introduction : In the world of finance, where exceptional skills and expertise are often sought after, it may seem unlikely that being an average analyst could lead to profits. However, there is a simple formula that can help you achieve good results despite your average performance. This formula revolves around the concept of risk management, which many of us fail to implement effectively or understand correctly. Moreover, risk percentage plays a vital role in this equation, shaping the number of opportunities available to traders. The Importance of Risk Management and Risk Percentage: In our current field, there are individuals who possess the skills to read charts and build analyses but struggle to use them effectively. On the other hand, some people have the financial means but lack the ability to distinguish between bullish and bearish trends. Somewhere in between is the average individual, whose accuracy may not exceed 50%, but they may still perform better than both of the aforementioned groups. However, it's important to note that having the necessary skills, money, and proper application is a requirement for everyone in this field. Applying the Risk-to-Reward Ratio and Risk Percentage: The key lies in implementing risk management, a concept often overlooked. Let's consider a scenario where you execute 10 trades, with 5 trades reaching their targets and the other 5 hitting the stop-loss. Without proper risk management, you find yourself back at the starting point or, worse, your account shrinks. This highlights the problem that needs to be addressed. Now, let's examine the same performance but with the application of risk management, including the risk-to-reward ratio and risk percentage. By determining the risk-to-reward ratio for each trade and defining a risk percentage, we can significantly impact our results. Understanding the Risk-to-Reward Ratio: The risk-to-reward ratio plays a significant role in determining the potential profitability of your trades. A ratio of 1.5:1 or 2:1 is often considered favorable, but it's important to understand how different ratios can affect your overall trading outcomes. To grasp this concept, let's consider a risk-to-reward ratio of 1.5:1. This means you are risking $1 to potentially gain $1.5. With a 50% accuracy rate, even if you lose 5 trades out of 10, your net gains will exceed your losses. This is because the profits from the winning trades will surpass the losses from the losing trades. Similarly, a risk-to-reward ratio of 2:1 implies that you are risking $1 to potentially gain $2. With a 50% accuracy rate, even if you lose 6 trades out of 10, your net gains will still be positive. The profits from the winning trades will outweigh the losses from the losing trades. Higher risk-to-reward ratios, such as 3:1, offer even greater potential for profits. Even with a lower accuracy rate of less than 40%, you can still achieve overall profitability by allowing your winning trades to compensate for the losses. The Role of Risk Percentage: Risk percentage, on the other hand, determines the amount of capital you are willing to risk on each trade relative to your account size. By defining a specific risk percentage, such as risking 2% of your account on each trade, you establish a predetermined limit on potential losses. This ensures that your losses are controlled and do not exceed a predefined threshold, protecting your overall trading capital. Additionally, the right risk percentage opens up opportunities for multiple trades, increasing your chances of finding profitable opportunities while mitigating the impact of any individual trade that may result in a loss. For instance, imagine you have a trading account with $1,000 and decide to risk 1% on each trade. This means you are willing to risk $10 on any given trade, allowing you to potentially take 100 trades. Alternatively, if you choose to risk 0.5% per trade, you can potentially take 200 trades. It's important to strike a balance between the quantity and quality of trades when implementing the appropriate risk percentage. While having more opportunities can be beneficial, maintaining a disciplined approach and executing trades that meet your predefined criteria and align with your trading strategy is essential. Conclusion: In conclusion, being an average analyst or trader doesn't mean you can't achieve profits in the financial field. By implementing proper risk management, specifically by utilizing the risk-to-reward ratio and risk percentage, you can enhance your results significantly. Learning and understanding risk management is crucial for success in the market. So, embrace this simple formula and take charge of your trading journey, regardless of your initial performance level. Good luck to all. 🙏we ask Allah reconcile and repay🙏
BITSTAMP:BTCUSDEducation
by HamadaMark
3
Steps to Becoming a Profitable Trader This is a roadmap to becoming a profitable trader. Follow these steps to avoid wasting time and bouncing around from idea to idea. We start with a basic strategy idea we like, then build off it. We MAKE it profitable by following the steps outlined. 1. Focus on One Idea or Strategy Focus on one specific idea. An idea is not “price action” or “technical analysis”. That is too broad. But you could start with the idea of day trading an 8 and 21-period moving average crossover. Or MACD signal crossovers on a 1-minute chart. Or the rounded top or bottom or pattern, or triangles, or Keltner channel bounces off the center line in strong trends. Basically, you need an idea and a time frame (1-minute chart, daily chart, etc). 2. Define the Strategy Since you have your idea, you already know the basic concept of the strategy. If you don’t have a strategy yet, that’s where a bit of research comes in: finding something you like the idea of. There are loads of free strategy articles on this site, in the courses offered, and from other sources such as books, Youtube, etc. Whatever strategy you decide on, it needs to include these key components: A trade setup. The trade setup is what needs to happen for us to even consider a trade. It could be a specific chart pattern, moving average crossover, price action signal, etc. Where, when, and why we enter A trade trigger is a precise event that tells us to get into the trade. When the “trigger” event occurs, it turns a possible trade setup into an actual trade. Where, when, and why we exit profitable trades Where, when, and why we exit losing trades If and how we trail a stop loss. 3. Polish Your Strategy Keep practicing. Keep improving your strategy. Try that on different markets, under different circumstances. Make it better and better till it starts making money. Keep it simple and focused on one trading idea. Get better and better at that idea. Keep refining and building your confidence in the method. We gain confidence by seeing something work and being able to implement it. And that’s what all these steps are about. Please, like this post and subscribe to our tradingview page!👍
OANDA:BTCUSDEducation
by EliteTradingSignals
6
⚠️ Risk Management Examples Showcase📍What Is the Risk/Reward Ratio? The risk/reward ratio marks the prospective reward an investor can earn for every dollar they risk on an investment. Many investors use risk/reward ratios to compare the expected returns of an investment with the amount of risk they must undertake to earn these returns. A lower risk/return ratio is often preferable as it signals less risk for an equivalent potential gain. 📍Consider the showcased example: An investment with a risk-reward ratio of 1:3 suggests that an investor is willing to risk $100, for the prospect of earning $300. Alternatively, a risk/reward ratio of 1:4 signals that an investor should expect to invest $100, for the prospect of earning $300 on their investment. Traders often use this approach to plan which trades to take, and the ratio is calculated by dividing the amount a trader stands to lose if the price of an asset moves in an unexpected direction (the risk) by the amount of profit the trader expects to have made when the position is closed (the reward). It is very important to calculate your R:R before entering a trade. Sometimes the trade might not be worth the amount you're risking vs the reward you can get. 👤 @AlgoBuddy 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
2
Targets Matter TooIt may not seem like it is very critical, but let's use two traders as an example. Trader #1 on the left uses targets. They know the move may be way bigger than what they target, but every time they close a position, they can re-enter again, keeping a small risk for consistent reward. Trader #2 on the right wants a home run every trade, and they do not use targets. They know big moves happen and they want it (greed) If they risk small, evetually they will get the home run trade, but at what cost? Trader #1 had a great day. They took 7 trades and lost two. Final results +135 points (150 won from 5 x 30, -15 from 2 lost) They had a consistent hit rate, closed several winners, and never had to stress about the charts because their move was over in a few minutes. No grey hairs today. Trader #2 however sees how trader #1 does things, and thinks, "that's no good. All those tiny trades and short targets, they could just make one trade and make HUGE! that's what I'll do...." They see a possible entry, and it works. Price gets jumpy and they get excited "This just has to go forever! I'm rich! Beat that other trader!" They have to go to sleep eventually and let the trade run. When they wake in the morning, they find they were stopped out. How? It left with so much momentum there's no way it would come back! :( Now trader 2 wakes up to a bad trade, which makes the rest of the day terrible. Why couldn't they catch that and close it? It's ok, I'll try again. Set another trade, watch for hours, walk away and same result. Constantly getting stressed and worrying about the stop being hit, because they don't have a target that makes sense. Maybe they do put targets in eventually, but then the "This is a home run!" sets in, and they remove the target, because hey, one trade for 300 pips is better than 10 for 30, it's just logical, right? Stop hit after stop hit, and eventually, the account goes kaput. Had trader#2 copied the target mentality, And set even a slightly beyond reason target, they still have more chance of success than the "Home run hunter" Yes, the 100 r trade is awesome, I'd like to have one. The only problem with hunting that massive winner is it will cost you a lot more than just some money. It will cost you time, stress, sanity, and make your head grey before it's time. So is the home run really worth this? I'll leave that decision to the individual, but numbers don't lie. The trader with targets is doing well. They can even raise their lot sizes with confidence, and know that when they lose 4 times, it's a bad day (Because of R:R) and stop to keep the account healthy. The trader without a target just keeps losing trades, deals with constant excitement and doubt, can't leave the charts, and can never be confident enough to trade beyond a minimum size, because they have been stopped out so many times, what if they take the risk and it (likely) fails, like all the other trades..... And they never grow the account, even if they do all the other things right. They may get profitable, but they won't ever grow exponentially, because the confidence will never agree with the trade, and they won't be able to hold it long enough to be worth it. Targets are where consistency comes from. This is especially true about scalping. DON'T BE GREEDY! Set a target and take the money. Stop letting a fast candle delete your target. Often times, price will run, you remove the target, and u-turn right to the stop loss (probably reaching the target you had). Don't delete a winner and get knocked out by a stop run over volatility. They also can not get a solid statistic for trades, and never gain the certainty in putting the risk on the line. Trader #1 can do whatever they want. They know how often they win, how well the system they use works, and they know about what to expect for a return on a good day, so they can trade any amount and let it run to the target without panic. They know out of 10 trades, they lose 4 times. Because of the R ratio, If they use the same value for the lot stops, they will make money no matter the trades play out..... Comfortable, no greed, certain, and highly profitable to a point of exponential account growth. That's how they do it.... So, pick a R ratio, 1:2-3-4. Use it consistently, and then tally the results. After some practice, you can find a good ratio that works for your trading style. The larger the ratio, the less you will win. The math is on your side though, because 1:3 only needs to win 4 out of 10 times to make money... Pick one that fits your strategy/style/level of patience, and you may find a big difference in your trading consistency. Consistency is what really makes or breaks an account. Consistently hit targets, account will grow. Consistently enter, wait days, and stop out will surely ruin the account over time. Stop the account demise with targets, and ALWAYS have a target if you find yourself breakeven or stopped out often.
Education
by ForexStoryteller
⚠️ Risk:Reward & Win-Rate CheatsheetThe reward to risk ratio (RRR, or reward risk ratio) is maybe the most important metric in trading and a trader who understands the RRR can improve his chances of becoming profitable. Basically, the reward risk ratio measures the distance from your entry to your stop loss and your take profit order and then compares the two distances. Traders who understand this connection can quickly see that you neither need an extremely high winrate nor a large reward:risk ratio to make money as a trader. As long as your reward:risk ratio and your historical winrate match, your trading will provide a positive expectancy. 🔷 Calculating the RRR Let’s say the distance between your entry and stop loss is 50 points and the distance between the entry and your take profit is 100 points . Then the reward risk ratio is 2:1 because 100/50 = 2. Reward Risk Ratio Formula RRR = (Take Profit – Entry ) / (Entry – Stop loss) 🔷 Minimum Winrate When you know the reward:risk ratio for your trade, you can easily calculate the minimum required winrate (see formula below). Why is this important? Because if you take trades that have a small RRR you will lose money over the long term, even if you think you find good trades. Minimum Winrate Formula Minimum Winrate = 1 / (1 + Reward:Risk) 👤 @AlgoBuddy 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
8
GOLD : What Should Be Ideal Risk Reward Ratio OANDA:XAUUSD A good risk/reward ratio could be seen as greater than 1:3, where you would risk 1/4 of the overall potential profit. For trading to prove profitable in the long term, a trader should not typically risk their capital for a lower risk/reward ratio, as this will mean that half or more of their investment could be lost. The risk/reward ratio marks the prospective reward an investor can earn for every dollar they risk on an investment. Many investors use risk/reward ratios to compare the expected returns of an investment with the amount of risk they must undertake to earn these returns. A lower risk/return ratio is often preferable as it signals less risk for an equivalent potential gain. Consider the following example: an investment with a risk-reward ratio of 1:7 suggests that an investor is willing to risk $1, for the prospect of earning $7. Alternatively, a risk/reward ratio of 1:3 signals that an investor should expect to invest $1, for the prospect of earning $3 on their investment. Traders often use this approach to plan which trades to take, and the ratio is calculated by dividing the amount a trader stands to lose if the price of an asset moves in an unexpected direction (the risk) by the amount of profit the trader expects to have made when the position is closed (the reward). KEY TAKEAWAYS The risk/reward ratio is used by traders and investors to manage their capital and risk of loss. The ratio helps assess the expected return and risk of a given trade. In general, the greater the risk, the greater the expected return demanded. An appropriate risk reward ratio tends to be anything greater than 1:3.
OANDA:XAUUSDEducation
by INVESTRONE