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Risk Reward Ratio in Forex

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rais

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The risk reward ratio is the ratio used by many investors / traders to compare the expected return on an investment with the amount of risk taken to get the return. This ratio is calculated mathematically by dividing a large potential loss of a trader if the price moves in an unexpected direction (in other words: risk) with a large potential profit that a trader expects to receive when a position is closed (in other words: reward)
So, let me explain more about the risk reward ratio. Say you want to trade on a EURUSD pair. You use 0.1 lot with a stop loss of 30 pips and a profit target of 60 pips. Your risk ratio (from stop loss) and reward (from profit target) is 1: 2 (30:60), where you trade double the amount of your risk. The risk reward ratio will be different for each trader. Based on his trading strategies and market situation, the risk reward ratio for every trade is not always the same. As a forex trader myself, I am still struggling to follow a good risk reward ratio. I usually trade with a risk reward ratio of 1: 1 which is the standard risk reward ratio in trading. But in my opinion, the risk reward ratio of 1: 1 is not so good if you don't have a trading strategy that is not really good.


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#1 - November 12, 2019, 12:26:10 AM

ariezz

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Quote from: rais on November 12, 2019, 12:26:10 AM
I usually trade with a risk reward ratio of 1: 1 which is the standard risk reward ratio in trading. But in my opinion, the risk reward ratio of 1: 1 is not so good if you don't have a trading strategy that is not really good.
Risk Reward Ratio is indeed one of the important risk management and is an effort to maximize profit potential. So the same as stop loss placement, RRR must also be appropriate and cannot be forced, for example the scalping strategy is also not suitable for applying reward ratios because the targets are too short. Some advanced traders often use a reward ratio of 1: 2 or 1: 3.
#2 - November 12, 2019, 02:32:14 AM

Pandorra

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I have never used this risk reward ratio because I trade with scalping style so it is rather difficult to apply the risk reward or I usually use a risk reward of 1: 1
#3 - November 17, 2019, 03:48:21 PM

Jatsun

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The RR strategy is very good indeed, and many also use it. In my opinion a good risk ratio strategy is 1: 2 with 1 risk and 2 reward.
#4 - November 18, 2019, 01:51:59 PM

Oneaemeka7

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Using a risk reward ratio 1:1 actually means your trading strategy must be very good, however, 1:2 will make you feel better. 1 rsik, 2 reward.
#5 - November 18, 2019, 02:42:09 PM

feru

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Risk ratios are very important indeed and I see rarely anyone pay attention to this
#6 - November 20, 2019, 02:42:42 AM

Afutur

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I agree more with 30:60 / 1: 2 than the post 1 explanation. 
Because then more control will be greater profit.
#7 - November 21, 2019, 03:57:40 PM

DewaFx

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Most beginner traders still do not use risk reward ratio because RRR is a strategy that in my opinion is not a basic strategy but unconsciously traders often use risk reward 1: 1 because they are less familiar with risk reward.
#8 - November 23, 2019, 03:15:43 AM

kamus

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Indeed, the risk ratio is one of our successes in forex trading, I always pay attention to this
#9 - November 24, 2019, 10:22:18 PM

Admirald

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Risk reward ratio is the application of MM which is quite good and helpful if I think because with the right risk reward will increase profit opportunities in trades conducted.
#10 - November 26, 2019, 11:14:11 PM

rais

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Quote from: Pandorra on November 17, 2019, 03:48:21 PM
I have never used this risk reward ratio because I trade with scalping style so it is rather difficult to apply the risk reward or I usually use a risk reward of 1: 1
If trading using Scaping does not need Risk Rewartd. But if you use Intra day or swing then Risk Reward is very important
#11 - November 27, 2019, 10:52:38 PM

instaforex

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risk ~ reward is a limit where we have limited RISK and also REWARD and created a ratio of these:

if a trader has been able to implement it in a disciplined manner with a stock system that is not engineered, there is a loss and loss then most of the systems newly built by the trader have a risk reward of 50:50 so if it is OP 10 then it will result in win 5 and lose too 5, I feel that when the Back Test system also adds stop loss and 1: 1 profit taking, which means 1: 1 wining rate

with our note OP discipline also added the system:

I am sure traders who have used SL and TP with a minimum 1: 1 win rate will definitely have a consistent profit, because the risk reward ratio is able to avoid losing big, even avoiding MC, but mostly after losing many times "instead of over-lot because of emotions and psiochology has not been trained it seems this is the level of difficulty as a trader learns discipline plus also keeps the psychology always good, so that we have more high flight hours so the risk reward can exceed 5: 5 so that the end result can be consistent profit
#12 - November 28, 2019, 12:53:46 AM

GreenPips

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The application of risk reward ratio is the same as applying money management where the trader must adjust the trading style with the appropriate SL and TP ratio, likewise if we use lots in trading, it must also be in accordance with several things such as capital, style and trading strategy.
#13 - November 28, 2019, 04:52:23 AM

Zesih

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I think RR 1: 1 is too risky, it's better to use Risk Ratio 1: 2/1: 3 because the percentage of profits is greater.
#14 - November 28, 2019, 05:56:01 AM

Samosir

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Risk reward ratio which is often abbreviated as RRR is one of the risk management that is quite important for me and many are also applied by traders and even proficient traders in the trading system.
#15 - November 28, 2019, 06:08:34 AM
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