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What is Wrong with Your Risk to Reward Ratio?

One of the more common trading rules that traders have in their Trading Plan is to take trades with at least a certain Risk:Reward ratio. (Or the Reward:Risk ratio, whichever you prefer.). What is this ratio, and why is it so important? That’s the easy part. Most of you reading this newsletter have had the idea of a 1:3 or greater Risk:Reward ratio drilled into you from the moment you sat through your first Online Trading Academy class. The general idea is you only take trades where you will risk 1 unit for every 3 units of reward. That could mean risk 10 pips to make 30 pips, risk 50 pips to make 150, etc. …continue to read this article”What is Wrong with Your Risk to Reward Ratio?”

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