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{quote} There are differences in odds and win rate in that picture. 1:1 has a 50% chance and 51% win rate to cover 1:5 has a 10% chance and a 17% win rate to cover. On the inverse, a 1:0.5 has a 75% chance and a 67% win rate to cover. A higher reward to risk will always have much fewer trading opportunities as well.
Exactamundo.
But such is the nature of the market, that when a trader starts drawing arbitrary lines offering 2:1 or 3:1 rr, there is significantly less than a 33% or 25% chance. The Markets Modus Operandi is too hunt liquidity and the bread and butter of market liquidity is found participants Stop Orders, thus the market is geared up to trade against the thought process and analysis of the majority of market participants.
I find myself increasingly moving away from 2:1, 3:1 trades, and closer to 1:1 or less, but with bigger sizes. Allowing that extra headroom, means that even when the market resolves against your thesis, you can still usually get out at scratch, or with a small profit. Utilising a tight stop, in order to get the positive RR trade, as 'they' all say that a trader should, means when the market resolves against you, you definitely lose. It also can also very often mean that even your core thesis was right, the market can still rinse your stop loss before going on to prove you right.
The result has been a much more stable account growth. None of the big upswings, but none of the crushing down turns either. I prefer the stability, and much prefer the lack of charged emotions that a lower RR approach entails also. I also much prefer the freedom to simply hit a level and get a feel for what the market is gonna do, instead of watching like a hawk for divergences, Ms, Ws, and other candle patterns, which are all bullshit anyway. The only thing that matters is choosing the correct level where the market is gonna reverse. Everything else is just bunk.
Edit: Just noticed I replied to this already, saying pretty much the same things.
