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Traders: Winning Ratio versus Risk/Reward
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Traders: Winning Ratio versus Risk/Reward

  #11 (permalink)
Elite Member
San Diego, California
 
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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: https://futures.io/psychology-money-management/9009-winning-trade-confidence-vs-straight-losers-expectation.html)

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  #12 (permalink)
The fun is in the numbers
Point Roberts, WA, USA
 
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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.

Keep your mind in the future, in the now.
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  #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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  #14 (permalink)
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Israel
 
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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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