RISK REWARD RATIO - Trade like a professional.
Рет қаралды 109,733
Күн бұрынRisk Reward is arguably the most important aspect of a stock traders strategy. To trade like a professional you must fully understand the function of the risk reward ratio.
In this video we explain how the risk reward factor can be skewed in the favour of a trader, and by doing so the trading returns can be amplified.
Return On Risk is the real metric to determine the viability of a trading strategy, and the risk reward ratio enables the trader to do just that.
You will see how such a small increase of risk can have such a huge impact on trading returns.
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As a professional trader I have consumed hundreds of financial books and endured countless hours of self education. My hope is that this channel will reduce the learning curve duration of many aspiring traders by providing the key information in a concise and enjoyable manner.
I also offer a paid subscription service for those looking to see all my investment decisions.bit.ly/40S034v
@williamkz 2 жыл бұрын
Thanks Gareth. Perfectly explained. Another technique, for the non breakout trader (like me), is to buy close to support, or around the 20 week EMA, and calculate risk as distance to support whilst reward is the distance to top of Donchian channel.) If the ratio is better than 2 to 1, it's worth a punt. (Other factors have to be taken into account too, like the MACD.)
@FinancialWisdom 2 жыл бұрын
Hi William. Thanks for sharing!🙏
@mohamedelgendy62 2 жыл бұрын
The best channel on investing I have ever seen. Your videos can be the best selling honest educational course on investing!!!
@FinancialWisdom 2 жыл бұрын
I appreciate that!
@kapitalidea 2 жыл бұрын
I have honestly learned more from your channel than any other trading channel on KZfaq! I can’t thank you enough! In 2020 I decided to learn how to lose weight, I lost 75 pounds and have kept it off. In August of 2021 I decided to learn how to make money in the Stock market. I found your channel 3 months ago roughly and have designed a strategy based on your videos and I’m up with just under 40% returns in that time. I cut losers quickly and let winners run with a strategic understanding of a exit point. I absolutely love your videos! This is the best channel on KZfaq as far as I’m concerned! Thank you 🙏 so damn much for your time and teachings! You have my utmost respect and loyalty!
@FinancialWisdom 2 жыл бұрын
Wow that's great feedback thank you! Glad to know you are gaining or should I say losing 😊
@ddtrader1755 Жыл бұрын
for me it is the other way around. I have lost 7.5K in cash and gained 40% in fat.
@CirclesEntertainment 2 жыл бұрын
Thank you for this channel. I am a visual learner and sometimes it is hard for me to read books alone. This helps me understand the book that I am reading.
@FinancialWisdom 2 жыл бұрын
Great to hear.... thanks
@joaosoares7600 2 жыл бұрын
The videos you make paired with the book titled Technical analysis of the financial markets by John Murphy make an incredible combination. Keep up the good work and thank you for providing so useful information every time.
@FinancialWisdom 2 жыл бұрын
Thanks Joao - I'll take a look.
@Yan-rh7mj Жыл бұрын
Reward to Risk is definitely the cornerstone of my strategy. Everything else should be working for it. Momentum, tight setups, timing, relative strength, industries and market conditions. Great video. Thanks.
@FinancialWisdom Жыл бұрын
Well said!
@BioInsight_Lectures 2 жыл бұрын
Thanks, one of the great learning youtube channel.
@FinancialWisdom 2 жыл бұрын
My pleasure!
@ashishwani5546 2 жыл бұрын
Your videos are very helpful for trading community for new trading ideas, risk management, psychology etc. I love the way u explain everything in simple words and appropriate example. I trade in Indian markets and got benefitted from ur videos. Keep it up. Thank you.
@FinancialWisdom 2 жыл бұрын
Great to hear🙏
@milktop1 2 жыл бұрын
Great great info as always!!! Thank you
@FinancialWisdom 2 жыл бұрын
Thanks for watching!
@gogo2122 2 ай бұрын
Thank you so much. Your channel helped me develop my own great strategy that helped me grow my account
@FinancialWisdom 2 ай бұрын
Great to hear!
@jervecullat5343 2 жыл бұрын
Beautiful explanation! Thanks man!!!
@FinancialWisdom 2 жыл бұрын
You're welcome!
@syarizma3976 2 жыл бұрын
Pure Gold! Really appreaciate it Sir. ❤️
@FinancialWisdom 2 жыл бұрын
Always welcome
@FinancialWisdom 2 жыл бұрын
Access the Breakout Stock Screener - www.financialwisdomtv.com/plans-pricing Access the Simulator Spreadsheet - www.financialwisdomtv.com/shop
@francisdelarosa6831 2 жыл бұрын
Thank you for the simulator
@jungsa4691 2 жыл бұрын
Hey, I just want to comment here that I really love your channel and content! I recommend it to anyone interested in trading whenever I can, especially for your commentary and criticism. Thanks you!
@FinancialWisdom 2 жыл бұрын
Thanks Jung - Appreciate that🙏
@kapitalidea 2 жыл бұрын
It’s the absolute best trading channel on KZfaq!
@niidaimehokage5731 2 жыл бұрын
@@kapitalidea agreed!
@krutillar 2 жыл бұрын
That's me. Willing to ride a stock to zero and take small gains because I am afraid of a reversal
@LukaszAdams Жыл бұрын
Very good video thank you Arno.
@FinancialWisdom Жыл бұрын
Glad you enjoyed it
@rajdeshmukh1233 2 жыл бұрын
Sir, probability is also is important R:R 1:2.25 has 25℅ probability of hitting target and R:R 1:1.33 has 40% probability of hitting target.
@rajdeshmukh1233 2 жыл бұрын
@@sasmitvaidya3594 yes.. In terms of only relative price movement.. Not with respect to chart patterns... Wt do u trade?
@KingJT80 2 жыл бұрын
its all dependent on the way you trade and how you enter aka your accuracy of entries and time spent in a trade
@ianbrown5955 Жыл бұрын
I have an RR of 2:1 win/loss ratio with a 40% to 50% win rate, month to month. 6% to 15% gains per month depending on number of set-ups I get. Forex market at the moment (EUR/USD)
@ianbrown5955 Жыл бұрын
With those ratios and win rates, you wouldn't profit.
@sameer-111 Жыл бұрын
@@ianbrown5955 Is your trading method simple?
@kennethjustin7304 5 ай бұрын
She's wonderful. She prayed after video. I am definitely given you a follow
@FinancialWisdom 5 ай бұрын
Awesome! Thank you!
@FinancialWisdom 2 жыл бұрын
My Brokerage Account (Interactive Brokers) - bit.ly/3UGvn1U My Breakout Scanner - bit.ly/3ea6sl8 My Forum - www.financialwisdomTV.com/forum My Strategy Blueprint - www.financialwisdomtv.com/plans-pricing Edgewonk Trade Analysis Software - bit.ly/3xS6S7s
@20sarbast 2 жыл бұрын
very useful. thank you
@FinancialWisdom 2 жыл бұрын
Glad it was helpful!
@fixdeen 2 жыл бұрын
As usual very nice video I would love when you will make video about Trading Tribe from Seykota
@FinancialWisdom 2 жыл бұрын
Noted
@TradeTheMarkets1 2 жыл бұрын
Please make videos on Wyckoff and Tom Williams
@szlpharmacology1330 3 ай бұрын
i use a robot that does well with an RR of 5:1. it requires the trade to 'breathe' before hitting the TP
@lakhangangurde190 2 жыл бұрын
Very very nice video sir 👌.. I love your video..... ❤️
@FinancialWisdom 2 жыл бұрын
Thank you so much 😀
@jimparsons6803 2 жыл бұрын
Much depends on your point of view.
@julianob.a.6365 Жыл бұрын
Great content. I just don't get it why some people uses the first R as risk, and others as reward. Sometimes it gets confusing. But great video and very easy to understand. I'm new to cripto trading, was always a buy and holder, but it's boring to be a hodlr lol.
@FinancialWisdom Жыл бұрын
Good point! thanks
@drdee2012 Ай бұрын
At 5:18, how do you get 4% risk ratio? Thank you.
@exeohe Жыл бұрын
Do you not obtain your “R” until after it breaks resistance in your original box @3:15?
@falconryforever 2 жыл бұрын
Its all sounds great, on paper.....but only have a meaning in hind site. One never knows what the next hours or day brings, you won't wait for the brake out price to extend too far, then the number of your stopped out trades will increase, loosing less more often.All you can control is the risk, the reward ratio, can only be determined afterwards if there was any at all....
@FinancialWisdom 2 жыл бұрын
Not so much on paper, I have applied this approach for many years. Its all about putting probability in your favour, therefore improving the win rate too. limit loses and maximise wins is ultimately the goal.
@nobbystevens 2 жыл бұрын
Another great video. However, in practice, keeping the loss at 1 % max is not feasible in my specific case. The transaction costs combined with the tax fee is putting me already at -1.2 %. Essentially, the batting rate and risk reward ratio must be higher in order to make a profit.
@FinancialWisdom 2 жыл бұрын
Hi Nobby, 1% is max equity risk, not positional risk.
@nobbystevens 2 жыл бұрын
@@FinancialWisdom Thanks for that clarification! Again: I really enjoy your videos, outstanding work.
@therapeutika8989 2 жыл бұрын
Great videos. Is there one that explains of how often it happens that she stock gaps down in aftermarket and never sells at the stop loss level and what to do in that case? I have found myself with a position still going because it gapped down and I end up becoming an accidental investor because of that.
@FinancialWisdom 2 жыл бұрын
Not that I know of. To be honest its a very rare occurrence for me, perhaps more so on small/micro caps
@EMan-cu5zo Жыл бұрын
I have taken two losses around 95% each. The old saying you don’t lose money until you sell is total crap. I learned the hard way.
@FinancialWisdom Жыл бұрын
Yep, always have a stop loss
@ScottieBeans63 2 жыл бұрын
I'm a little confused and I hope someone can explain. In the example he has both trades with a 50% win rate. To me entering the trade later in #2 would confirm the breakout. #1 it would seem would be more apt to have a false breakout. If that's the case #1 would have losing trades that #2 would avoid and therefore #2 should have a higher win rate. What am I missing?
@FinancialWisdom 2 жыл бұрын
The breakout of the upper resistance line is at #1, and will have lower risk. If the rationale for a stop loss is at the lower of the consolidation both would have equal chance of being stopped out 'in theory'. It is always a trade off between risk reward and win rate
@DorianGreer Жыл бұрын
How do you determine the reward target? Or do you just go for a set return at which you exit regardless of how good the trade is or isn't going?
@FinancialWisdom 11 ай бұрын
Backtest data or your own previous trades (the average reward)
@softprob2838 2 жыл бұрын
During a market crash a novice trader will keep hope that one day his portfolio will come to break even, but when market crashes even more he panic sells all his position and loses money. And when market begin to rise the same novice trader is afraid that anytime the market can change the direction and can go bearish, and this results in the trader locking in the profits very early missing out on big gains.
@FinancialWisdom 2 жыл бұрын
Very true
@MeysamHoseini-pj9en 10 ай бұрын
Hello, I entered 1000 USDT in a Crypto pair trade position by a Risk-to-Reward of 2 ; If it reaches to my take profit/TP, then I will have 2000 USDT ? Thanks,
@babylane4636 2 жыл бұрын
Thanx, cartoons always make it easier lol
@FinancialWisdom 2 жыл бұрын
lol i guess it takes the mundane out of it...
@acetheboss13 2 жыл бұрын
How arw you deploying capital in relation to R/R ratio? Are you doing percentage Kelly or predetermined position sizes? (250, 500, 1000 share etc )
@FinancialWisdom 2 жыл бұрын
Yes I'm using fractional Kelly.
@exeohe Жыл бұрын
How are you getting these “R”’s?
@Sungrassful Жыл бұрын
What if the price action never reaches the stop loss or profit price and just ping pong back and forth. At which time would you cut your profit or cut your loss below your limit. You can’t hold forever and prevent other opportunities.
@FinancialWisdom Жыл бұрын
Staying within a positive trend i.e 20 week moving average will help, as does the MACD. Of course you cant be right all the time, we can only move the probabilities into our favour using a positive expectancy approach. Just like a casino.
@alberto-huerta 2 жыл бұрын
Do you ever short a stock after a breakdown from consolidation?
@FinancialWisdom 2 жыл бұрын
No I dont, I have a long bias to the markets and trade that way. If the market turns collectively I turn to cash.
@aldolabuonora 2 жыл бұрын
thanks for your videos!! if you enter at a higher price that would probably means a higher win rate? so you have a worst risk reward but a higher win rate i suppose
@FinancialWisdom 2 жыл бұрын
Absolutely!
@aldolabuonora 2 жыл бұрын
@@FinancialWisdom yesterday i sign up to your website!! I have a question: do you use the same method to short stocks? And in other markets like commodities or cripto or forex? I want to trade in different markets that are not correlated Thanks
@FinancialWisdom 2 жыл бұрын
@@aldolabuonora Hi - I dont short stocks, I have a long term positive bias and I trade that way - I do trade Bitcoin on the long side too,
@aldolabuonora 2 жыл бұрын
@@FinancialWisdom Until now I am not short stocks either, but I am afraid that a market correction could cause me a very large drawdown, in that case having some shorts would help minimize the risk I suppose 🤷♂️
@FinancialWisdom 2 жыл бұрын
@@aldolabuonora Possibly.... maybe shorting the index would be a better option for you...
@Puwitt 2 ай бұрын
Traders r the worst at yt😂 this vid helped a lot ty
@FinancialWisdom 2 ай бұрын
Thanks 👍
@ricardosebastian9115 2 жыл бұрын
I'm a newbie I still don't know!
@redalienx6144 2 жыл бұрын
Love you
@FinancialWisdom 2 жыл бұрын
Love you too!
@kapitalidea 2 жыл бұрын
Awe I love all of you too! Lol
@NotesFromTheExecutive Жыл бұрын
Hi there, I live in New Zealand and the time zone is brutal for trading with the US market. How can I trade and make money while living in New Zealand?
@FinancialWisdom Жыл бұрын
Hi - I use the weekly charts therefore trades can be opened and closed on the weekend regardless of timezone.
@niidaimehokage5731 2 жыл бұрын
Just asking what things do you discuss in your group?
@FinancialWisdom 2 жыл бұрын
Hi - Everything strategy related, a weekly report from me, my selections/philosophy etc
@niidaimehokage5731 2 жыл бұрын
@@FinancialWisdom where do you invest? Stocks? Crypto?
@nickjo05 8 ай бұрын
very confusing but i am trying my best to understand it
@ut360q Жыл бұрын
In market trading, many experts emphasize the importance of Risk Reward Ratio in Stop Loss Level design, with all sorts of arguments & rationale. Isn't it true that the more fundamental thing is the competency & skills in market projection which may bring profit. If this projection is wrong，the best Reward Risk Ratio does not work.
@constanciacollene9585 2 жыл бұрын
You don’t always have to think long term. Investing/Trading is as much a tool for shaping your present financial situation as it is for forming your future one. Do you want to buy a BMW next year? Do you want to go on a cruise? Wouldn’t a vacation that was paid for with dividends feel nice?
@constanciacollene9585 2 жыл бұрын
If you are investing in the hope of buying a house, you will almost certainly be looking at longer-term instruments. If you are investing to buy a computer in the new year, you may want short-term investments that pay dividends or some high-yield bonds.
@constanciacollene9585 2 жыл бұрын
PRISCILLA DEARMIN-TURNER is my financial Expert .. look her up
@rayHaguar Жыл бұрын
in my opinion i think we should put minimum RRR 1:2
@Content_838 Жыл бұрын
No 1:3 is good but do what makes u profit
@ielungwang2954 2 жыл бұрын
Hello, may I know what software do you use to make this animation? Great content as always..
@FinancialWisdom 2 жыл бұрын
Hi - Videoscribe
@marutr Жыл бұрын
Talk is easy. to Do it is another story.
@batman-om2kx 2 жыл бұрын
😎
@FinancialWisdom 2 жыл бұрын
🙏
@Bikash_yadav0 2 жыл бұрын
R-Multiple by Dr. Van Tharp
@FinancialWisdom 2 жыл бұрын
Yes it's very insightful
@sohelshaikh6842 7 ай бұрын
Pzl hindi me video banaya kare
@artistryartistry7239 2 жыл бұрын
5:30 You don't explain you're getting the 4% 6% numbers.
@President_Joe_Biden Жыл бұрын
49 to 51 is a 4% increase. 49 to 52.25 is 6% (although closer to 7 actually) increase
@vigneshsv8888 2 жыл бұрын
Malayali undoo
@sellercapital Жыл бұрын
Yes
@CandyLemon36 8 ай бұрын
This content is rich with groundbreaking ideas. I came across a book with like themes that shifted my viewpoint. "Mastering Money Mindfulness" by Benjamin Hawk
@richardcrown9764 Жыл бұрын
I make huge profits on my investment since i started trading with a professional broker Mrs Stacie Morgan, her trading strategy are top notch coupled with the little commission she charges on her trade. Thanks so much ma'am♥
@benroland3652 Жыл бұрын
With just a thousand bucks. my portfolio is worth much more now within just weeks of trading with her thanks Stacie.
@martinthomas9371 Жыл бұрын
I'm surprise to see others who trade with Mrs Stacie, i am currently on my 5th trade with her and my portfolio has grown tremendously
@felixsizer300 Жыл бұрын
I thank you for the level-headed financial advice. I started my investment with $3,345 in just a week of trading with her I’ve gotten $7,939 in my portfolio. Thank you Ma'am
@anitalawrence2668 Жыл бұрын
Pretty good. please how can i reach this Mrs Stacie? i want to invest i'm in Taiwan
@martinthomas9371 Жыл бұрын
@@anitalawrence2668 REACH HER ON HER TELEGRAM
@user-wy8vi5ob8t 7 ай бұрын
Shit explaination starts at 2:50
@ticar6666 2 жыл бұрын
if you are profitable trader why the fuck do you sell your strategy and membership any profitable trader who makes millions havent sell any fucking thing about teaching stuff
@FinancialWisdom 2 жыл бұрын
Thanks for your kind feedback 😊
@szlpharmacology1330 3 ай бұрын
😂@@FinancialWisdom
@jasonstazm Жыл бұрын
How's your investing championship going now
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