{"id":9991,"date":"2022-10-14T07:17:11","date_gmt":"2022-10-14T07:17:11","guid":{"rendered":"https:\/\/mdr.foobrdigital.com\/?p=9991"},"modified":"2022-10-14T07:17:11","modified_gmt":"2022-10-14T07:17:11","slug":"reward-to-risk-ratio","status":"publish","type":"post","link":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/2022\/10\/14\/reward-to-risk-ratio\/","title":{"rendered":"Reward-to-Risk Ratio"},"content":{"rendered":"\n

To increase your chances of profitability, you want to trade when you have the potential to make 3 times more than you are risking<\/strong>.<\/p>\n\n\n\n

If you give yourself a 3:1 reward-to-risk ratio<\/strong>, you have a significantly greater chance of ending up profitable in the long run.<\/p>\n\n\n\n

Take a look at the chart below as an example:<\/p>\n\n\n\n

10 TRADES<\/th>LOSS<\/th>WIN<\/th><\/tr>
1<\/strong><\/td>$1,000<\/td><\/td><\/tr>
2<\/strong><\/td><\/td>$3,000<\/td><\/tr>
3<\/strong><\/td>$1,000<\/td><\/td><\/tr>
4<\/strong><\/td><\/td>$3,000<\/td><\/tr>
5<\/strong><\/td>$1,000<\/td><\/td><\/tr>
6<\/strong><\/td><\/td>$3,000<\/td><\/tr>
7<\/strong><\/td>$1,000<\/td><\/td><\/tr>
8<\/strong><\/td><\/td>$3,000<\/td><\/tr>
9<\/strong><\/td>$1,000<\/td><\/td><\/tr>
10<\/strong><\/td><\/td>$3,000<\/td><\/tr>
Total<\/strong><\/td>$5,000<\/td>$15,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

In this example, you can see that even if you only won 50% of your trades, you would still make a profit of $10,000.<\/p>\n\n\n\n

Just remember that whenever you trade with a good risk to reward ratio, your chances of being profitable are much greater even if you have a lower win percentage.<\/p>\n\n\n\n

BUT\u2026<\/p>\n\n\n\n

And this is a big one.. setting a large reward-to-risk ratio comes at a price.<\/p>\n\n\n\n

\"Reward-to-Risk<\/figure>\n\n\n\n

On the very surface, the concept of putting a high reward-to-risk ratio sounds good, but think about how it applies in actual trade scenarios.<\/p>\n\n\n\n

Let\u2019s say you are a\u00a0scalper\u00a0and you only wish to risk 3 pips.<\/p>\n\n\n\n

Using a 3:1 reward to risk ratio, means you need to get 9 pips. Right off the bat, the odds are against you because you have to pay the spread.<\/p>\n\n\n\n

If your broker offered a 2 pip spread on\u00a0EUR\/USD, you\u2019ll have to gain 11 pips instead, forcing you to take a difficult 4:1 reward to risk ratio.<\/p>\n\n\n\n

Considering the exchange rate of EUR\/USD could move 3 pips up and down within a few seconds, you would be stopped out faster than you can say \u201cUncle!\u201d<\/p>\n\n\n\n

If you were to reduce your\u00a0position size, then you could widen your stop to maintain your desired reward\/risk ratio.<\/p>\n\n\n\n

Now, if you increased the pips you wanted to risk to 50, you would need to gain 153 pips.<\/p>\n\n\n\n

By doing this, you are able to bring your reward-to-risk ratio somewhere nearer to your desired 3:1. Not so bad anymore, right?<\/p>\n\n\n\n

In the real world, reward-to-risk ratios aren\u2019t set in stone. They must be adjusted depending on the time frame,\u00a0trading\u00a0environment, and your entry\/exit points.<\/p>\n\n\n\n

A position trade could have a reward-to-risk ratio as high as 10:1 while a scalper could go for as little as 0.7:1.<\/p>\n","protected":false},"excerpt":{"rendered":"

To increase your chances of profitability, you want to trade when you have the potential to make 3 times more than you are risking. If you give yourself a 3:1 reward-to-risk ratio, you have a significantly greater chance of ending up profitable in the long run. Take a look at the chart below as an example: 10 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[777],"tags":[],"_links":{"self":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9991"}],"collection":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/comments?post=9991"}],"version-history":[{"count":0,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9991\/revisions"}],"wp:attachment":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/media?parent=9991"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/categories?post=9991"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/tags?post=9991"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}