Please cite your source for this. I know lots of traders THINK they need 1:3 risk to reward, but that does not mean this is a successful RR to have.
I'd much rather have a 1:2 risk to reward with 40% winning trades than 1:3 risk to reward with 25% winning trades, just as an example. I'd also rather have a 2:1 risk to reward if I had a 70% chance of winning comapred to 1:3 with 25% wins.
My point: risk:reward, by itself, means NOTHING.
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Your edge is underdeveloped or you stopped developing as a trader, and risk of ruin is high if you do not see at least 1:3 trades all over the place. If you see and do not place and take those you have emotional problems.
I can just speak for myself . It is the path you go down when you start your trading journey . I had unreal goals . Under estimated how difficult the journey would be or how long it would take . Trusted trading educators that can not trade as well. I think my biggest mistake was starting of day trading first . It is like starting collage with out a elementary education . After year three I went back and got a swing trading education and swing traded until I was profitable doing that . To my surprise things that did not work well on a small time frame chart worked on the larger time frames . I also seen there was no real need for holy grail domes or footprint charting . A lot of the time and money I wasted the first three years was on unnecessary stuff because I skipped elementary school and started collage . I did not know any better .
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If you risk $1 for a reward of $3 then, what I call the profit factor (size of wins vs size of losses), is 3. I think we can agree to this. Now, if you lose 75% of your trades and win the rest, you are still losing in spite of the high profit factor.
Another way:
Lets say over 100 trades, your win ratio was 25% and your risk/reward was 1:3.
You won 25 trades making $3 each = $75.
You lost 75 trades losing $1 each = -$75.
Net you lost after commissions.
@kevinkdog is right. By itself win ratio or risk/reward means nothing. You have to look at them together.
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OK, when you say risk:reward of 1:3 is good, you are including some undefined win% percentage in the scenario that makes the math work out for a profitable strategy. That makes sense.
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I actually had a question, if using "Scrying" can help you look into the future, you should have a 100% win rate on your trades, right? what's stopping you from becoming a multi-billionaire then?
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the larger the RR the lower the win rate is in most systems . you can have a profitable system with a 30 % win rate . however you will all ways have larger draw downs with lower win rates . even with a 50 % win rate you can have 10 to 15 L in a row . few traders can handle that mentally because it stops them from leveraging up . so they can not make the income they dreamed about . so the trader goes searching for a system that does not exist . 80% winners at 3 to 1 RR with little draw down .
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