Please compare 2 Strategy: Risk 2 to get 1 vs  Risk 1 to get 2 which is better?

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Hi all, some professional says if you put your stoploss 100 points you should aim at least 200-500 points (therefore you should choose your entry point very carefully)

But another approach is using little bit broad stoploss to give price enough room to breath while it goes to the way you want (main trend direction). Like to get 200 points using 500 stoploss

What do you think? Which is the better approach?
 
MEHMET FATIH BARUT:
Hi all, some professional says if you put your stoploss 100 points you should aim at least 200-500 points (therefore you should choose your entry point very carefully)

But another approach is using little bit broad stoploss to give price enough room to breath while it goes to the way you want (main trend direction). Like to get 200 points using 500 stoploss

What do you think? Which is the better approach?

Anything with a better than 1:1 risk to reward ratio is considered interesting.

 
Eleni Anna Branou:

Anything with a better than 1:1 risk to reward ratio is considered interesting.

Really?

 
MEHMET FATIH BARUT:

Really?

The 1:1 ratio is applied in risk/reward of every trade, not the profit/loss in account terms, don't get confused.

You can have a 1:1 risk/reward ratio in every trade, but win more times than you lose, so you will end up winning.
 

Return is expectancy of win × value of win - expectancy of loss × value of loss. So increasing RRR without lowering expectancy is good. Unfortunately usually the opposite happens. You can go for a 2:1 but instead of a 50:50 W/L ratio your W/L will lower.

Stop guessing. Code your strategy, optimize it, and your question will be answered.

 
MEHMET FATIH BARUT:
Hi all, some professional says if you put your stoploss 100 points you should aim at least 200-500 points (therefore you should choose your entry point very carefully)

But another approach is using little bit broad stoploss to give price enough room to breath while it goes to the way you want (main trend direction). Like to get 200 points using 500 stoploss

What do you think? Which is the better approach?

The main part of a trading system is to find the right values for stoploss and takeprofit of its trades or in other words to know where to close a position.

Suppose we have a system that produces winning trades 80% of the time and losing trades 20% of the time. But let’s say our system is not good at choosing the right values for SL and TP of our trades in such a way that our average wining trade gives a profit of $100 while the average losing trade is $2000. Based on these assumptions the expectancy is (0.8 * $100) – (0.2 * $2000) = $-320.

Even though the system produces winning trades 80% of the time, the expectancy is negative and thus we would lose money over time.

So we need to understand the dynamics of the market to be able to choose these values in a smart way.

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