#361: This Trade has a 14.6 Reward:Risk ratio

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Podcast:

This Trade has a 14.6 Reward:Risk ratio

In this video:

00:29 – Selling the EUR/CAD on the Weekly chart

00:46 – I promote high reward:risk trades

01:33 – Money management is very important

02:32 – Low risk per trade is also important

03:39 – Trade with a 14.6:1 R:R profit target, currently at 6.4:1 R:R

06:16 – Understanding what you need to do in order to trade well

I want to tell you all about a trade that I’ve got on my platform right now that has a 14.6:1 reward to risk ratio. Let’s get into that and more right now.

Hey traders, Andrew Mitchem here at the Forex Trading Coach with video and podcast number 361.

Selling the EUR/CAD on the Weekly chart

I want to talk about a trade that I’ve got on the weekly charts on the Euro/Canadian Dollar. We put it on our membership site on Monday. It has a 14.6:1 reward to risk ratio if it gets to its full profit target. More about that shortly.

I promote high reward:risk trades

But if you’ve been following me for any length of time, you know that I endorse and I suggest and I promote people look at trades that have a high reward to risk ratio. So what does that mean? So in easy numbers it means if you have a reward to risk of let’s say 4:1, it means if you’re risking 1 part you’re making 4. So if you’re risking 1% of your account, you’re making 4%. For me, I personally trade at half of 1% risk per trade, is what suits me. So that means I’m risking one part, of half of 1% of my account, to make 4 parts, or 2% gain on my account if the trade gets to the profit target. It’s very easy for you to do that regardless of your account size.

Money management is very important

To me, the biggest part of trading apart from having a strategy and a right mind set is to have that money management important that you get it right. So low risk per trade is very, very important but also high reward to risk is very important. So it means that I’m not always going to be right. I don’t need to be right all of the time. In fact, the higher the win rate most systems the worse they are. Hard to understand that, but it’s true. Think about it this way: there’s no point in having a 90% winning system if you’re losing money. Most 90% winning trade systems do lose money because they make lots of small gains, one big loss. I flip that around and go the other way. For me, something like a 40-50% win rate is amazing, because I have high reward to risk trades. Some are 2:1, some are 3, 4, 5:1. The one in particular that I’m going to talk about is 14.6:1.

Low risk per trade is also important

So low risk per trade is massively important also. I was looking at a post on Facebook, one of those sponsored links on Facebook, someone selling this new algorithm. It was really interesting to look into it, because it looked really cool. It looked really flashy, looked amazing. Then you look into it a bit further and I could see that they were risking 5% per trade. Now for the novice or for the completely financially person doesn’t understand trading, 5% risk per trade doesn’t sound like anything good or bad really. It’s just looks really cool and you make lots of money. The problem is if they get three or four trades wrong in a row, they’re 15, 20% down. If I get three or four trades wrong in a row, I’m 1.5 to 2% down. Massive difference especially up here and in here. Big, big difference. So if you’re listening to the podcast, I was tapping to my head and my heart. So psychologically and emotionally, it makes a big, big difference.

Trade with a 14.6:1 R:R profit target, currently at 6.4:1 R:R

So, let’s get onto this trade. It has a 14.6 reward to risk. It was taken this week, we published on our membership site just this week on Monday morning at the beginning of the week, selling the Euro/Canadian on a weekly chart. You can go and look at it on your chart, you can see the trade. The price pulled back perfectly to our entry level. We have a tight stop on the trade all according to the way that we trade and it’s all pre-known well in advance. But if the trade gets to its full profit target and because it’s a weekly chart trade it may take a week or two to get there, it may well do. Right now I see no reason to get out of the trade. Right now as I’m recording this, and I’m recording this on Thursday because tomorrow’s Easter, I’m recording this on Thursday the 9th of April. Right now that trade is up 6.4:1 reward to risk. So it’s nearly halfway to its profit target, not quite. If I did nothing else than close the trade out right now, I’ve still made 3.2% on my account. But I don’t need to and I’m not going to, because the trade’s looking really good.

So you see the importance there of high reward to risk. Let’s say this trade gets to its full profit at a 14.6:1 reward to risk. With my really tiny risk of only half of 1% of my account risked on this one trade, if it gets to that profit target, which there’s no reason why it won’t, it’s going to make me a 7.3% gain on my account from that one trade with that tiny risk. 7.3%. Where else can you get a 7.3% gain on anything in a year? Especially now with all the virus stuff going on. Everybody’s just losing money all over the place with shares, with their superannuation. In New Zealand here we call it Kiwi Saver. All your pension funds, property’s likely to go, there’s massive unemployment going on. It’s just going to get worse. Taxes have got to go up to cover this. So everybody for the next 10, 20 years the tax rate’s going to be higher around the globe, it has to be. Someone’s got to pay for all these bailouts and handouts and all the stuff that’s going on. We’re probably not even halfway through it yet.

So you look at all that doom and gloom going on, and then you look at this one trade that took like two minutes to see and to place on Monday morning and we’re already up 3.2%, could get to 7.3.

Understanding what you need to do in order to trade well

So once you understand trading, once you understand control risk, once you understand high reward to risk, you’re halfway there to making yourself a good trader. If you need our help with any of that, or you’d like for us to help you place trades, this was all written on our membership site in advance of the trade retracing. If you’d like help with any of this, you’d like to take advantage of our help and knowledge and our years of trading, day in day out doing exactly the same, you can find us at the forextradingcoach.com and I’ll put a link on this video and podcast to our membership site where you can have a look at everything that we teach in our course. So have a great weekend, have a great Easter.

This is Andrew Mitchem at the Forex Trading Coach and I’ll see you this time next week for more trading tips and information. Bye for now.

The 30 Minute Trader Trip

Watch how Andrew made a +12.79% gain on a live account during 4 weeks while trading for just 10-30 minutes a day while on holiday in the UK and France.