Advanced Concept of Risk-reward Ratio in Trading

Naïve traders always thinking by following the simple concept of risk-reward ratio, they can make huge money. Things don’t work like this in the real world however. Most of the time, the new traders in Hong Kong close the trades too early with fear. They want to book a small portion of their investment and make things worse. To become better at trading, you must learn to take steps like the professional traders in Hong Kong. Never close the trades too early since it ruins the risk-reward ratio. It makes trading much hard and thus chances of losing your entire investment goes high. Let’s learn some amazing techniques by which you can trade the market with proper risk-reward ratio.

Set realistic risk-reward ratio

By setting an unrealistic reward ratio, you might jeopardize your trading career. At times, you might get a 1:1 risk-reward ratio but this doesn’t mean you will place the trade to make money. However, if you are confident with the trade setup, you can take the risk. But never forget the fact, trading is more like dealing with the uncertainty. So, if you trade with a 1:1 risk-reward ratio, you have must have a great win rate. Having a great win rate is very hard. Try set a minimum 1:2 risk-reward ratio in each trade, since it will make things easier. Instead of using a complicated trading strategy focus on simple goals and you will never have a tough time in trading? Forget the idea that trading is all about a high-risk approach.

Trading with the market trend

Trading with a high risk-reward ratio doesn’t make you good trade. In Forex, you have to respect the market trend. Having 1:1 risk-reward ratio trade setups in favor of the trend is much better than trading the market against the trend with a 1:3+ risk-reward ratio. Things might get hard once you start to focus on the trend. But if you devote yourself it won’t take much time to develop your skills and become good at trading. Never forget the fact you are here to make money. So, try to follow a conservative approach and protect your investment at any cost.

Avoid trading the news

You might set good risk-reward but there are few other things you need to take care of. For instance, if you trade against the major news, it won’t take much time to blow up the account. You might lose money while trading favor of the news. Spikes are very common in the volatile markets. Try to reduce the risk exposure by learning more about news trading. Forget the fact you are here to make a dramatic change in your life. Just like in any other business you need to take logical steps in trading. At times, you might get lost but this is normal. Take a short break and start trading with a fresh mind.

Use of trailing stops

The new traders often kill the risk-reward ratio in each trade by using the trailing stops. Unless you are well aware of the advanced support and resistance level in trading, you should trade the market with trailing stops. Start using the fixed sets of rules since it will make you better at trading. Does this mean you will never use the trailing stops in trading? You can use the trailing stops but for that, you must have a proper understanding of the key support and resistance level. To do so, you must use the Saxo demo account. There is no need to learn to trade with real money since high-end brokers are always offering free learning platform. Take advantage of such a platform and you will eventually succeed in trading. Think twice before you execute any trade and try to improve your skills by learning from the mistakes. Always take rational steps while placing any trade.

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