Trading with High Reward:Risk Trades
In this video:
00:34 – Reward:Risk is often overlooked
01:15 – Don’t worry so much about win rates
01:57 – Trade makes a massive 9.2:1 R:R
03:30 – A 2.3% account gain with a 0.25% account risk
03:56 – Live Webinar and 4 trades close for full profit
I'd like to share with you the importance of achieving high reward to risk trades in your trading, how it can help you so much, and also let you know about a massive trade that we took last week. Closed profit this week for 9.2 reward to risk trade. Listen up. I've got some great tips for you.
Hey traders, Andrew Mitchem here, the owner of the Forex Trading Coach video and podcast number 320.
Reward:Risk is often overlooked
Now reward to risk, sometimes not the most exciting part of Forex trading. It's often overlooked, but it's something that you should not overlook and it's something that you should really strive very hard to achieve high reward to risk trades in your trading. Why? Well, if nothing else, when you achieve a high reward to risk trade, not only does it make good profit in your bank account, but it gives you a massive boost. It gives you a huge amount of confidence, because what it then allows you to do is have maybe a few losing trades, but your profitable trade that you've just had eats up those small losses plus lots more, and that's why it's good.
Don’t worry so much about win rates
You see people get too caught up in talking about win rates, and I get it all the time. People say to me, “Hey Andrew, how many trades do you get as winning trades? What's your win percentage?” And I've seen people, true story, I've seen people with a 90% win rate who lose money because they have lots of small trades, and then one big losing trade. Lots of small trades, one big losing trade. So they might have lots and lots of gains, 90% gains, 90% winning trades, but they are still losing money, and that's not good. Dents your confidence cause that one big losing trade smashes through all those good trades that you've just slowly built up.
Trade makes a massive 9.2:1 R:R
Let's flip that in reverse and look at it the other way. You need to have high reward to risk trades, so the trade that I suggested on my membership site to my clients just last week on the 1st of May was a sell trade on the New Zealand dollar Japanese yen based on the monthly chart.
So go and have a look at the monthly charts for the close rate for 2019, and you'll see the setup that we took. Now, we enter our trades with a part of our position at a retracement and part at the market order, so I split up a half percent risk and total quarter percent risk at the retracement if it gets that quarter percent at the market. Now unfortunately our retracement order didn't quite get filled by just four pips. That missed being the perfect retracement by four pips. If it hadn't made profit, it would have made a 214 pips, and it would have made a 3.2 reward to risk trade. Still really nice, however our market order, which obviously it was in the market at the beginning of the month, had a very small stop loss. Only 22 pips stop loss because that's where it needed to be, and it had a huge 214 pip profit target, which it hit yesterday on the 9th of May, so we ended up making 214 pips.
That doesn't matter. What does matter is that we had a small stop loss, and again the small stop loss is not even the point. The point is we made a massive 9.2 to one reward to risk gain out of that trade. That is absolutely huge.
A 2.3% account gain with a 0.25% account risk
So with our quarter percent risk on that one trade, it still made us a massive 2.3% gain on our account. So think of it that way. Quarter percent risk, real tiny, tiny risk, but a huge 2.3% account gain. Very, very important you see that happen on your charts and you see those gains. It really is a huge boost to your confidence.
Live Webinar and 4 trades close for full profit
So one more thing to share with you, apart from the high reward to risk trade is that last night on my live webinar, we hit full profit on our daily chart, which is the Aussie US dollar, and that was on our membership site. We also hit full profit on a 12 hour chart trade Aussie Canadian, which was mentioned on our forum site, and I took two trades in front of my clients behind me here on my chart's live account on the Aussie- sorry, on the British Pound New Zealand dollar, the first trade on the one hour chart, and an hour later at the close or the next handle, I took a sell trade on the British pound Canadian dollar and both hit for profit. Good reward to risk in those trades. No where near as high as 9.2, but that was a monthly chart as opposed to a one hour chart, but the aim is to have high reward to risk trades on all of your trades. It will massively help you becoming profitable as a Forex trader.
So once again, this is Andrew Mitchem, the owner of the Forex Trading Coach. I'll see you this time next week. Bye for now.