montmorencyt2w
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I was listening to a recorded interview with a long-time trader (can't remember the name ... it's one of several I was listening to...If I can find the relevant bit again I will edit it in later). It gave me a slightly new perspective on R:R:
Lets say you start off with a risk of 100 pips and a target of 100 pips, so R:R=1:1.
Now let's say your trade gets to +90 pips, and then looks like it might reverse on you. What is your R:R at this point? Well, if your stop is now at BE, you are risking your 90 pip profit for a potential further reward of 10 pips, so Risk:Reward=9:1.
If your stop is still at the original place, it's even worse, at 19:1. You could trail the stop but wherever you leave it, there is a risk that your profit is going to be less than it is at this moment, so you are probably better off closing it out now. It may have been another trader who said "Don't be greedy. Leave some on the table for someone else".
It works similarly in the other direction. Let's say the trade worked out differently, went into loss and is has reached 10 pips away from your stop. What is your R:R at this point? Well, you could close it out now and save 10 pips, or you could just leave it and see. You never know what might happen. If it turns round again and hits your target, your reward was 190 pips for a risk of 10 pips.
Lets say you start off with a risk of 100 pips and a target of 100 pips, so R:R=1:1.
Now let's say your trade gets to +90 pips, and then looks like it might reverse on you. What is your R:R at this point? Well, if your stop is now at BE, you are risking your 90 pip profit for a potential further reward of 10 pips, so Risk:Reward=9:1.
If your stop is still at the original place, it's even worse, at 19:1. You could trail the stop but wherever you leave it, there is a risk that your profit is going to be less than it is at this moment, so you are probably better off closing it out now. It may have been another trader who said "Don't be greedy. Leave some on the table for someone else".
It works similarly in the other direction. Let's say the trade worked out differently, went into loss and is has reached 10 pips away from your stop. What is your R:R at this point? Well, you could close it out now and save 10 pips, or you could just leave it and see. You never know what might happen. If it turns round again and hits your target, your reward was 190 pips for a risk of 10 pips.
