👨🏫When Trading, Always Follow One Simple Rule:
Always seek a bigger reward than the loss you are risking.
This is a valuable piece of advice that can be found in almost every trading book.
Typically, this is called a “risk/reward ratio”. If you risk losing the same number of pips($) as you hope to gain($), then your risk/reward ratio is 1-to-1 (sometimes written 1:1). If you target a profit of 80 pips ($100) with a risk of 40 pips ($50), then you have a 1:2 risk/reward ratio.
If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades.
What ratio should you use?
It depends on the type of trade you are making.
You should always use a minimum 1:1 ratio.
That way, if you are right only half the time, you will at least break even.
Generally, with low probability trading strategies, such as counter trend trading strategies, you will want to use a lower ratio, perhaps between 1:1 and 1:2.
For Higher probability trades, such as MY Winning trading strategy, a higher risk/reward ratio is recommended, such as 1:2, 1:3, 1:4 OR EVEN 1:10 (don't expect this right away. its takes time and patience). Remember, the higher the risk/reward ratio you choose, the less often you need to correctly predict market direction in order to make money trading.
In this Trade on AUDUSD - I've taken a long trade and I've risked 10 pips for a 150 pip reward 😁📈📈(Currently sitting at 90 pips = 1:9 Risk to reward ) .
3 237:27 PM May 30, 2018
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MINORS: CHFSGD. This pair is moving between 1.4500 and 1.3500for over years now and roght now price seems to be near support. Now lets zoom in on the daily to see what we have there.
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