Risk Reward Ratio Will Kill You In Forex, Don't Let This Happen To You!

Many traders do not realise the importance of risk/reward when trading the Forex market. If you are taking profit at less then you risk you need to average an extremely high win % to be consistently profitable in the long run.

It was not long after I started looking into the mathematical reasoning behind the risk/reward ratio in trading that I turned the corner into consistent profitability.

Let me give you some examples using different risk/reward ratios and how this would affect you in the long run.

1. Risking 30 pips to gain 10 pips - You would need to have 75% wins just to break even.

2. Risking 30 pips to gain 30 pips - You would need to have 50% wins to break even.

3. Risking 30 pips to gain 60 pips - You would need to have 33% wins to break even

4. Risking 30 pips to gain 90 pips - You would need to have 25% wins to break even

As you can clearly see in example 1 you would need to win 80-90% of the time to make money, however in example 4. you would only need to win 30-40% of the time to make money.

Can you see how this can affect you in the long run?

Take my advice, if you are looking for a Forex trading system make sure you check its risk/reward ratio before you trade it long term.

Demo trade it and take samples of around 100 trades to get a good estimate of what you can expect in the future.

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