Tuesday, April 2, 2013

Risk Reward ratio in Forex

In forex money management is most important part , U need to know how much risk you can take for what extent of reward.


usual R:R ratio
1: 1.5   
example,  Your TP is 60 pips and your SL is 40 pips, So your RR ratio is 1:1.5
Here you can profit even you win 50% of all trades.
Your total monthly trade is 20. You loose in 10, U profit in 10
So calculation is 10 loose trade= 10*40= 400, your profit trade 10, 10*60=600, So your total
gain is 600-400=200pips

preferred RR ratio
1:2
Example, your TP is 60 pips, SL is 30 pips, so RR ratio is 1:2
Here you can profit even you loose 60% of all trades.
Your total trades in month is 20, you loose in 12 trades and wiln in 8 trades
So the calculation is 12 loose trade= 12*30= 360, 8 profit trade is =8*60=480
Total gain = 480-360= 120 pips
But if you profit trade is 50%, so your profit  will 600-300= 300 pips

My target:
I need to win 50% of all trades.
I stop the trading if win rate below 50,

1 comment:

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