Risk Reward

Our positioning is to risk between one or two percent of our equity per trade. Using the formula below, you will determine the amount of money you will risk per trade.

Position Size = Total capital X (1 or 2%) = Value of money risked per trade Divided by stop loss size Divided by price cost

With a 1 to 2 reward risk, we break even with a win-loss ratio of 33.33%. In other words, to end up being profitable, you would need a win rate above 33.33%, which seems quite acceptable.

When we use a 1 to 3 risk-reward ratio, we break even with a 25% win-loss ratio.

On the other hand, if we use a risk-to-reward ratio of 1 to 1, it would need to have a win-loss ratio of more than 50% to be profitable.

In conclusion, the better the risk-reward ratio, the better the profitability