Trading position and Risk/Reward ratio

This article about a case study in forex trading, namely the relationship between the number of trading positions and risk/reward ratio. Want proven here that the risk/reward ratio was instrumental in determining the trading results for the long term
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As an experiment, a trader with the method of price action open position trading 20 times in 2 weeks on the currency pair EUR/USD, GBP/USD and AUD/USD in demo account. Trading parameter used is fairly simple, not referring to any particular trading method, and each time you open a position on one of the three currencies.

Risk/reward ratio every time they log position is 1:2 with level 50 pip stop loss and profit target 100 pips, and not intervened again every open position. Trading results can be seen in the following table of history, with a total loss by as much as 12 times or percentage loss = 12/20 = 60%, and the profit or profit percentage 8 times = 8/20 = 40%

. With the risk/reward ratio of 1:2 as it has been determined, the overall result is still profit. Maybe you could try also on the demo account just to prove the important role and influence of the risk/reward ratio on the end result of your trading.

 

From the above you can see trading history, the important role of the implementation of the risk/reward ratio in trading, though the opening positions that we do without trading strategies or methods that have been tested. If we apply the method of price action probability has been tested so that we know the right time to open a position, then the probability that the end result of our trading should be better, of course for the long term. Such as price action method with a percentage of profit and loss is the same that is 50%, then by the same balance as above we still profit $ 500 ($ 1000 profit-loss $ 500). Of the many experiments that have been done without applying a particular method of trading for profit percentage is below 50% and the risk/reward ratio of 1:2, after several times entered the market average results obtained breakeven
breakeven. aka
A lot of traders who do not determine the risk/reward ratio properly. With the level of reward or profit target of less than 2 times the level of risk, then the percentage of profit should be able to achieve more than 50% in order to make an adequate profit earned in the long
. You can try to apply the method of price action with the setting of the risk/reward ratio of at least 1:2 (could be, e.g. 1:2.5 or 1:3 depending on market conditions). If the setup price action has provided a valid signal, you can open a position with the setting stop loss and profit target appropriate risk/reward rationya. You do it with discipline and see the end result of your trading after several times opening position.

Professional traders who applied the methods of price action get used to see if the setup price action looks at the daily chart, if not then he is leaving the market for a certain period, usually 4 hours, and if there has been a valid trading signal, it checks whether the existing market conditions still logical to determine the risk/reward ratio of 1:2. If the ratio 1:2 it is still possible to obtain, he open position and leave the market to schedule the next day because their trading base with the daily time frame.

By combining the methods of price action that the probability is high and the application of money management with a risk/reward ratio of at least 1:2 on each of your open position trading, then you will get results that are consistent and profitable in the long term.