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I would argue it's easier (although not easy) to maintain a positive R/R and a lower win rate, though.
For example, if you have an average win rate of 60 % with a risk 1 / reward 3 ratio, you can still get ahead if your win rate drops to about half of that.
So, there's more room for error.
The other way around, risk 3 / reward 1, you'd need an 85 % win rate at minimum and just a drop to 75 % and you're breaking even.
I just migrated to a new computer, so I don't have my own statistics at hand right now, but since I'm considering throwing in the towel (see the other thread), I'm obviously not at a 1:3 risk reward consistently at a 60 % win rate.
Day trading, I find it hard on average to get 1:3 set-ups on ES.
Swing trading, I think it's much easier.
I think Kristjan Kullamaggi (filthy rich Swedish swing trader) said his win rate was around 30 % or lower, but his average reward is hugely greater than his average risk. In fact, he doesn't pay attention to his win rate at all.
I gave it a try after reading "The Biggest Loser", I personally cant handle that trading style.. A string of losers, holding all the way to that high take profit, or letting go all the way back down to break even. I cant stand a low win rate... I just tilt, it just doesn't fit my personality. I also read a while back, Tom on his live stream has been struggling this past year. Too much red ... nah, I'll pass.
I also read a while back here that their r:r was around 1: 1.7, instead of 1:2... I find that reasonable and it something I am currently striving for, but its not high on the list.
As for Tom, from what I heard from a friend who followed him for a bit was that he wasn't quite trading what he preaches as he would take quick profits.
Generally, I think letting a trade go all the way back to even is poor trade management.
Simplistically, if you have 10 points of unrealized profits and there's 5 points to target, you're effectively risking 10 points to get 5 as at that point in time there's 10 points you could pocket. So, definitely lock in some profits.
That's an interesting point Roark. So if you are risking 10 to make 5. So take profits.
I am writing this for input and ideas not coming at Roark.
.if you were looking for 15 points and you have 10 points profit at this point then you are
Actually risking zero dollars to get the extra 5 points.
The 10 in profits is a bonus because it is a gain that has not been realized so it's not losing anything except slippage and commission should it go back to your break even.
Perhaps there is even less risk since you wanted 15 points and you already have 10. The mkt is obviously trending in your favor. Perhaps this is when you really stick to your guns and let it ride to those 15 points or have a new exit strategy should it move say 14 points profit.
I personally would add to this position once I get my 10 points if I was looking for 15 points. If I added another position or 2 then I would almost double my gains only going to to 15 points and if I have 10 points of profit to risk then I am only risking my profit and fees etc. So adding at this point would mean risking 10 to make 10 or risking 10 to make 10 of a 2 lot.
Let's say we have 1 lot and we have 10 pts profit. We are targeting 15 points.
If I add 1 more position at profit of 10 points then...I'm risking 5 to make 5 points x2 right because I have 10 points profit already. This would be 1:1
Many speak of a 1:3 rr so if in 10 points profit and I need to make 30 points then
I would need to buy 5 lots to give me a total of 6 lots which if we get a run to 15 points profit and exit then we would be in 1:3 rr or 10:30. Because we are risking the 10 profit to get 30 gains. Yes actual gains would be 40 points es.
So this would give you 2 points on a stop if you added 5 more and with a total of 6.
This give less than 2 full es points.
ME personally if everything looks good I'm going to add.
Humbly, I think it's a matter of perspective. I used to think that way myself.
But the fact is if you do have 10 points of unrealized profits, they are yours to pocket, so I would say you're definitely risking them. Sure, by not taking an exit, you may get the big one once in a while, but you also need to account for all the unrealized profits that actually reverted back to even. I've seen guys who had huge swing trades coming short of their target by a few points and let it go all the way back to breakeven. That's not good trade management in the book. And I've had a ton of 5-7 point winners revert on me trying to get those last 3-5 points.
As for adding to a winning trade, I tend to do that myself and I'm a big advocate of it, but one have to know when to use it. Generally, in a range bound session, if ES moved 10 points in your favor you're late with the subsequent adds.
I like my adds to come sooner, i.e., for example after the initial back-fill/test of my entry. That way, I still have a pretty good average entry.
Adding to winners works great in a trending market or if your initial entry was early, but it works poorly in a range bound session.
