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Traders: Winning Ratio versus Risk/Reward
Started:October 25th, 2010 (09:03 PM) by nillz123 Views / Replies:3,723 / 13
Last Reply:March 23rd, 2011 (02:53 PM) Attachments:0

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Traders: Winning Ratio versus Risk/Reward

Old March 22nd, 2011, 10:07 PM   #11 (permalink)
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aquarian1 View Post
Expected return #1 : $90 *0.7 - $150 *.3 = +$18
Expected return #2 : $310 *0.45 - $150 *0.55 = +$57

Two is better.

Profitability = expectancy x opportunities. If you can find 4 "trade 1", but only 1 "trade 2" during the day, then "trade 1" is more profitable.

Also, keep in mind, low win rate will incur possible large draw down. Hence to keep the risk of ruin the same, you have to bet small with "trade 2" than "trade 1". (reference:

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Old March 23rd, 2011, 01:43 PM   #12 (permalink)
The fun is in the numbers
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And if trade 2 is 3 times more frequent than trade 1 then....
And if apples are oranges then...

This thread is about RR ratio versus W:L ratio.
A specific example was given.

No info on frequency is made and the only implication is even occurrence.
You could also extend your contrived example with contracts traded and pretend that you traded 3 times as many contracts on trade 1 as trade 2 and many other ways to try to make a silk purse of a sow's ear.

Good trading to everyone.
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Old March 23rd, 2011, 02:02 PM   #13 (permalink)
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You folks might find this equity curve widget useful for trying out various win rate & RR combinations.

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Old March 23rd, 2011, 02:53 PM   #14 (permalink)
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You folks might find this equity curve widget useful for trying out various win rate & RR combinations.

or you can download my RiskReward Calculator from NT6.5 indicators section

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