Hello TradeMates! #EDUCATIONL_POST
In this post I want to share with you this rarely seen knowledge which you should learn and be your trading Bibles cover page.
Without mastering and using this knowledge in your trades you will never be profitable on the long run! š
Take this example how to read the table:
Trading amount: 100$
On the vertical axis you have the risk reward ratio. From buttom up:
1:9 = 100$ (investment / risk) : 900$ (profit/gain)
On the horizontal axis you have the entry win rate probability. From left to right:
10% = Out of 10 trades you make profit 1 time. Meaning the price will increase and you stop loss will not be hit.
Reading the table like this will tell you based on statistical facts what has to be your risk / reward ratio and win rate to be profitable.
How to use this?
1). Step number one is you have to make sure that your entry has the potential for the risk / reward. Meaning, it is realistic for the price to surge to such an extent to fulfill your selected risk/reward multiplier.
2). Check your trading log, what is your win rate %
3). Adjust your risk reward to be in the profitable range.
4). If the risk/reward and win rate% don't have a crossing look for another oportunity, don't take the trade.
- Don't trade with money you don't have
- Make the plan, execute the plan
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