Risk Reward (Win/Loss Ratio)

Win/loss ratio is crucial to your success when trading on the stock markets. You have the freedom to decide how much you can afford to lose and how much you are willing to win. There are legendary traders who make million dollars profits with a success rate of 50%. How do they do it? With a good RR. When they are right for the direction of the trend, they take an advantage of it and win much more than they actually lose. The win/loss ratio should be at least 2:1. This way, even with a success rate of 50% you will make good profits. In order to have a good RR you have to be patient with your winning positions as opposed to your losing ones. You can make the process automated to a certain extent. For this purpose you should always put stop-loss and take-profit orders. Your take-profit should be at least two times greater than your stop-loss. In case you do not put a take-profit order you have to be patient. It is advisable to mark the chart with the minimal level at which you would take your profit. In terms of stop-loss orders it is highly recommended to use them if you want to stay longer in the business.