Podcast:

Play

In this video:
00:36   A massive difference to overall trading performance
03:04   Seventeen trades all together that have closed this week
05:06   “From Dairy Farmer To Forex Trader” eBook available on Amazon

The Importance of High Reward to Risk Trading and How it can make such a Huge Difference to Your Overall Trading Performance

Hi traders it’s Andrew Mitchem here from the Forex Trading Coach and in today’s video and podcast I want to talk about the importance of high reward to risk trading and how it can make such a huge difference to your overall trading performance. Let me share that and more with you right now.

Hi today it’s Friday the 23rd of May and I’m Andrew Mitchem from the Forex Trading Coach and I want to share with you the importance of high reward to risk trading because it’s something that makes such a massive difference to your overall trading performance and I’ve just made a note here of the trades that I’ve taken myself this week and they will just really emphasize the importance of high reward to risk trades.

I’ll start with the weekly trades. I’ve had four trades close this week on my charts based on the weekly charts. They weren’t all taken this week, but they’ve closed this week. Four trades have closed.  Two of them have made profit and two have lost. So, I’ve only had a fifty percent win right there. A lot of people get caught up on strike rate and win rate and “Andrew do you have a ninety percent win rate?” No, I don’t. But it doesn’t matter because the reward to risk is high.

Let me share with you the returns. Those two trades that both hit full profit averaged a 3.2 to 1 reward to risk. In other words, if I was risking let’s say a hundred dollars if the trade lost. On the profitable trades they average $320 so it’s a 3.2 rewards to risk ratio. The two that made and the two that lost, at half of one percent risk each that was a 2.2 percent gain on my account from just those four trades. Don’t forget that fifty percent of the trades I took on the weekly charts lost. But, I still made 2.2 percent gain with only a half percent risk each due to the high reward to risk of those trades.

On to the daily time frame charts. I’ve had five trades close this week. Three of them have been profitable and two have lost. Again, an average for the profitable trades of 2.1 reward to risk. Over the five trades that has given me a 2.15 percent return again on those daily chart trades. Again, two have lost out of the five, so not a great win rate but still a very good return. 

Lastly, the four hour chart trades. I’ve had five profitable trades and three losing trades. Those trades have averaged a 1.8 to 1 return to risk on those trades which you have five trades at 1.8 and take away three losing trades. That’s given me a three percent return on my account. So, add that all up together and I’ve had seventeen trades all together that have closed this week. Ten of them have been profitable and seven of them have lost. And again it’s not a very high win rate but it’s still ok, but it’s not a massive win rate. Yet, I’ve made 7.35 percent return on my account this week and I’ve still got today, Friday, to go of which I’ve still got several trades behind me here that are looking really good.  So, 7.35% return for a half percent risk per trade.

I have no idea how many pips I’ve made or lost this week because it doesn’t matter. And so many people again get caught up on the number of pips they are making. It really has no relevance at all to your trading performance. The important thing is how much you are risking on each trade and how much you’re making overall.  The great thing is with those trades (ten winning trades, seven losing trades) is that ratio can be swapped around the other way and I could have more losing trades than winning trades, but I’m still profitable because when I have a winning trade, it’s so much more. 

It’s sort of two or three times the amount that I am risking on the losing trade. So, you can see that you don’t have to have an 80 or 90% profitable system. You can have a thirty or forty percent profitable system and still do well and make money. That’s a really important point that I wanted to make there because the thing is when you start to talk pips what happens with the weekly chart trades that have bigger stop losses all lose and on my four hourly chart trades have smaller profit targets all make. If you start talking about making number of pips, it becomes a crazy thing to do really. Unfortunately, it’s what so many people are lead to believe is the way to make money in trading is to make pips. It really isn’t. Believe me.

The last thing I want to mention. My e-book “From Dairy Farmer To Forex Trader.” It’s here. I have a copy here in front of me. The hard copy or paperback/physical copy. The Kindle version has been downloaded over 600 times in the last week. It is available on Amazon as a paperback version here and it’s available to download on Kindle. If you’d like that just search for my name Andrew Mitchem or search for the book title “From Dairy Farmer To Forex Trader.”  Search that in Amazon and you’ll find the book there.

So, that’s all for now. I hope you’ve enjoyed this video and podcast. I look forward to talking to you this time next week. This is Andrew Mitchem from the Forex Trading Coach.

 

Quick Links

FAQs

Contact
About Andrew
About Paul
Testimonials
Privacy
Disclaimer
Cookie Policy

Resources

Free eBook
Free Risk Calculator
Are You New to Trading Forex?
Are You About To Give Up Trading?
30 Minute Forex Trader Update
Online forex video course
One on One Coaching in Person
One on One Coaching – Online
© 2020 The Forex Trading Coach Ltd (NZ FSPR:FSP37396) provides general information and educational courses and materials only. This is not an offer to buy/sell financial products. We do not provide personal advice nor do we consider the needs, objectives or circumstances of any individual. Financial products are complex and all entail risk of loss. Over-the-counter derivative and foreign exchange products are considered speculative because they are highly leveraged and carry risk of loss beyond your initial investment, hence should only be traded with capital you can afford to lose. Please ensure you obtain professional advice to ensure trading or investing in any financial products is suitable for your circumstances, and ensure you obtain, read and understand any applicable offer document.

Latest Podcasts / Videos

#359: What Is Forex and How Do You Start Trading?

 Podcast: What Is Forex and How Do You Start Trading? In this video: 00:26 – The basics of Forex trading 00:46 – Coronavirus and the need for additional income 01:11 – Forex is the best market to trade – here’s why 02:10 – Trading currencies in pairs...

#358: If You Don’t Trade Forex Now, You Never Will

 Podcast: If You Don’t Trade Forex Now, You Never Will In this video: 00:24 – The world has gone mad 00:36 - Traditional investing is not working 01:00 – Why we trade the Forex market 01:21 – You need to be trading right now 01:57 – Email from a client...

#357: Are You Thriving or Just Surviving?

 Podcast: Are You Thriving or Just Surviving? In this video: 00:33 – Paul Tillman was here in NZ last week 01:12 – How we made profit from the Coronavirus news 02:06 – The stats show that only 5% make good money 03:05 – The system and strategy works in...

#356: Will the Coronavirus affect Forex Traders?

 Podcast: Will the Coronavirus affect Forex Traders? In this video: 00:20 – Joined by Paul Tillman from NC, USA 00:40 – Webinars, Trades and the Coronavirus 01:00– Recent webinars and how you can benefit – view the recording 02:45 – Our trading day...

#355: What Does Your Trading Day Look Like

 Podcast: What Does Your Trading Day Look Like In this video: 00:25 – How to structure your trading day 01:06 – You’re not going to be a full-time trader immediately 01:46 – Fit your trading around your current situation 02:10 – My trading day 03:45 –...