[maildigger]

A) What kind of risk/reward are you looking for in combination with the % winners/losers?

B) Assume you have a small edge (55% winners, 45% losers) as a trader. What kind of risk/reward would you consider as enough in the long run ( 1:1 / 1:1.5 / 1:2 / 1:2.5)?

[james_gsx]

I would want at least 1:1.5 (risk $1 to make $1.50) if your odds are like that. Obviously, the more the better. This way, if you take a series of losers after a series of winners you won't be back at break even.

[trader273]

I think that there needs to be a "Realism" factor in this ratio. Anyone can say they want to risk 1 to make 10, but how realistic is that you are going to make ten before losing 1? If you can consistently stay about 1, and depending on your trading costs, you can go around 50% and break-even. Being more realistic, you would probably have to go around 55-60%.

Then the question becomes how do you quantify this throughout the day. Do you keep a constant 1:1.5 ratio? So either you have a fixed profit in mind and your stop will be based on that, or your profit objective will be based of your stop. Either way, you will be hard pressed to remain consistent. What I mean is, some trades will require smaller stops which means smaller profit objectives ( if you are staying at a constant 1:1.5). Now a problem will arise if you take your profitable trades on the smaller profit objectives, but take your losses on the larger stop/profit objective trades.

Some trades might say, well no matter what I'll have a 2 point stop and a 4 point target. This might work for some, but without using market structure to figure profit objectives and stops, I believe you will find yourself frustrated with the amount of stop outs.

I am not suggesting that money and risk management isn't key in successful day trading, I just do not believe the risk-reward ratio is as important as everyone makes it out to be. It looks good on paper, but in practice it can be hard to maintain.

[smwinc]

Originally Posted by maildigger »

A) What kind of risk/reward are you looking for in combination with the % winners/losers?

B) Assume you have a small edge (55% winners, 45% losers) as a trader. What kind of risk/reward would you consider as enough in the long run ( 1:1 / 1:1.5 / 1:2 / 1:2.5)?

Risk to Reward is a stat you evaluate in hindsight.

You can ESTIMATE your reward, and (generally) fix your risk. In my opinion, risk/reward is completely over emphasised. It is an assumption. The trader who thinks he can fix his risk has never had a stock gap, undergo a trading-hold, your broker/platform/exchange/internet go down, etc.

Similar story for win/loss %. Who cares, seriously? Today I had 7 losers in a row, scratching / -1 tick trades. Then I hit a winner, got onto a runner, scaled in aggressively and made a little over +40 ticks.

Win to loss at that point in time = 10% winners / 90% losers.

The important stats are things like:

-Average winner vs average loser
-largest winner vs largest loser
-distribution of winners/losers above your average (i.e. averages can be misleading, especially if you have a small sample)
- Max/average adverse excursion & max/average favorable excursion

Am I on my own in thinking this? perhaps worthy of a discussion.

[torero]

I agree r/r is only an assumption that you will get that, but in reality it rarely happens as expected. Even when you try to keep as such, you become boxed in by that very concept you do reach your reward target, not letting profits run becomes a crutch down the road. For me, the best judge of good strategy is avg win/avg loss in combo with #losses/#wins. If you find out your # wins to losses you have an idea how to work on picking better setups with smaller stop losses but not the target as it's more unpredictable.

[maildigger]

If you don't care about risk:reward ... Scaling out is essential? Or how do you determine where to get out?

[trader273]

Originally Posted by maildigger »

If you don't care about risk:reward ... Scaling out is essential? Or how do you determine where to get out?

If you scale out of winners, you better be scaling out of losers also.

[DbPhoenix]

Originally Posted by maildigger »

If you don't care about risk:reward ... Scaling out is essential? Or how do you determine where to get out?

Judging by your posts here and elsewhere, you appear to be fairly new, and much of what you want to know may become clear as you become more experienced (I'd like to say "will" become clear, but that is often not the case). Issues of nearby rewards and tight stops and trailing stops and risk:reward ratios and where do I enter/exit and how I do I distinguish up from down are among the most common puzzlements that beset beginners and are all a consequence of their not knowing just what it is that they're looking at.

Once you understand what you're looking at and become familiar with it, you should be able to determine the best entry for your risk tolerance, and you will have defined what constitutes a reversal signal (I say "should" because many people never do). Once that's accomplished, it's simply (but not necessarily easily) a matter of entering when you're supposed to and staying in until you get your reversal signal. At that point, all the issues regarding stops and r:r and cutting profits short and so forth will for the most part evaporate.