Sunday, May 28, 2017

How to find a strategy that trades with 1:4 Risk Reward Ratio

August 13, 2016 by  
Filed under Forex FAQ & Latest Post


In today forex faq, we have a question from one of our fellow traders asking me the below questions

Hi Kelvin

I have been following your blog for 6 months and I must say that you have a very informative blog.

I have seen some videos that you have posted and I am impressed by how you trade with a risk reward of 1:4 and above.

I will like to ask how can we find a strategy that trades with 1:4 risk reward ratio.

First of all, I will like to say that the only way a trader can be profitable is to have a strategy that has a high risk reward ratio. It is not necessary that you need to have a 1:4 risk reward ratio strategy. In fact, a minimum of 1:2 RR is what you need to be profitable in your trading.

Just in case some of you here do not know what is risk reward ratio, please space me a few minutes to explain.

It is the amount of risk versus profits that you take in a trade. For example, if you enter a trade with 25 pips stop loss and 50 pips target profit, you will have a trade with 1:2 risk reward ratio.

With a 1:2 risk reward ratio strategy, your one win can withstand two losses and therefore can enable you to stay profitable every month.

The only way you can get a strategy with at least 1:2 risk reward ratio is a strategy that trades in the direction of the trend. It is only through riding the trend that a trader can get a good risk reward ratio.

You should have heard of the phrase “The trend is your friend” and there is nothing more true than that.

If you have been following my blog, you should have heard me telling you to avoid trading against the trend as this prove challenging even for experienced trader.

If you are a student of my Fx Street Uni course, you will know that all my strategies are trading with the trend and that is exactly how I can get 1:4 risk reward ratio trade.

Therefore I will advice you to either learn a strategy that has a high reward ratio or formulate one yourself. If you do not know how to formulate your own strategy, you can take a look at one of my previous post on my blog.

I hope that I have answered your question and do feel free to email me if you have any question

 

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