Exiting a position on a signal vs. exiting at a predetermined target level

[thejaconator]

I like Support and Resistance breakout and trend line breakout trading with little to no indicators because I can easily find many different types of recurring patterns/signals for entry. However, as far as determining my exit targets or placing my take profit/ stop loss targets, I'm all confused.

If I place my exits in such a way that my risk/reward ratio is greater than 1, then it seems as though I will lose in the long run because of getting stopped out (I have done some manual backtesting).
If that ratio is equal to 1, then I barely break even (and lose slightly when I take the spread into account).
However if that ratio is smaller than one, then I usually manage to escape getting stopped and I run away with a small profit.

Am I bound to fail when accepting a risk that defeats the reward?

If not, can anyone can suggest a method for predicting a reversal and exiting and accepting a small profit (smaller than my initial risk)?

Has anyone had experience with this?
Do most profitable traders never accept a fractional risk/reward ratio?

 

[amit1986]

To be honest, I rarely think about the risk-reward ratio. The ratio, while it may make sense, doesn't take account of the probability of the price hitting your target.

Think about it: if you are waiting for a breakout within a tight range, the fact that the stock has been consolidating within that range implies that there is greater probability price is "comfortable" in that range.

So making trading decisions purely on risk-reward ratios is, at
best, trader suicide.

Best thing to do is to make entry/exit decisions (prior to entering a trade) based on a strategy. After that, you can evaluate whether the system gives a good risk-reward ratio.

Amit

I like Support and Resistance breakout and trend line breakout trading with little to no indicators because I can easily find many different types of recurring patterns/signals for entry. However, as far as determining my exit targets or placing my take profit/ stop loss targets, I'm all confused.

If I place my exits in such a way that my risk/reward ratio is greater than 1, then it seems as though I will lose in the long run because of getting stopped out (I have done some manual backtesting).
If that ratio is equal to 1, then I barely break even (and lose slightly when I take the spread into account).
However if that ratio is smaller than one, then I usually manage to escape getting stopped and I run away with a small profit.

Am I bound to fail when accepting a risk that defeats the reward?

If not, can anyone can suggest a method for predicting a reversal and exiting and accepting a small profit (smaller than my initial risk)?

Has anyone had experience with this?
Do most profitable traders never accept a fractional risk/reward ratio?