1/
The power of a good Risk Reward Ratio (RRR)

Example: A trader uses 1:3 RRR on all his trades. He loses 7 trades, wins only 3 trades and still manages to become profitable. Want to learn how? Read this thread below!⬇️

(And follow us for more!)
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2/
When using a RRR of 1:3 it means that your Risk (Stoploss) is 1 and your Reward (target 1) is 3. So your Reward is always 3 times as big as your Risk.

So, for example: When I take a trade with $100 Risk, it means that my Reward is $300.
3/
When your tradesetup has a 5% stoploss (Risk) it means that target 1 (Reward) has to be atleast 15%.

When your tradesetup has a 2% stoploss (Risk) it means that target 1 (Reward) has to be atleast 6%.
4/
Definition of Risk:
Risking $100 doesn’t mean you have a $100 position. It means that when the SL gets hit you lose $100 dollar. Most traders risk max 1% of their tradestack on a trade.
When someone has a $10.000 tradestack it means he will lose max $100 when his SL gets hit
5/
When your tradesetup has a 5% stoploss it means that you can’t enter with your full tradestack, because:

5% loss on $10.000 = $500

So how do I make sure I still risk only 1% on my full tradestack? It’s called “Position Sizing”.
6/
When you know your stoploss percentage you can calculate the position by dividing the total tradestack by the stoploss percentage.
When the stoploss is 5%, you divide your total tradestack by 5.

$10.000/5=$2.000. This is your position.

5% stoploss on a $2.000 position=$100!
7/
One more example:

You found a setup with a stoploss of 2%. Again, you can’t enter with your full tradestack, so you have to divide your tradestack by the stoploss percentage.

$10.000/2=$5.000

2% stoploss on a $5.000 position=$100!
8/
RRR and position sizing are both part of riskmanagement. The only way to become a profitable trader is by mastering riskmanagement.

Thanks for reading! Retweet and follow for more!

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