#413: How to Increase the Reward:Risk of Your Trades

05/30/21 • 6 min

How to Increase the Reward:Risk of Your Trades Podcast: #413: How to Increase the Reward:Risk of Your Trades In this video: 00:29 – An easy technique which will increase your profits 00:53 – Most traders focus only on Win Rates 01:52 – How do you achieve high R:R trades? 02:24 – Using Limit Orders 03:49 – A real time example from the USD/JPY D1 chart 05:23 – A lower win rate but make massive gains 05:44 – My June FX Insiders Webinar – email me if you’d like to join me I'm going to explain to you how you can increase the reward to risk of your trades by using limit orders. It's a very important part of your trading success. Let's get into that and more right now. Hey, traders, Andrew here at the Forex Trading Coach with video and podcast number 413. An easy technique which will increase your profits Now I want to explain to you a very easy technique to increase the reward to risk of your trades, and by increasing the reward to risk of your trades, that is a massive step forward for you to become a profitable Forex trader. Now, when people start trading, they probably don't value how important that is. Most traders focus only on Win Rates Most people seem to think about win rates and I get emails all the time saying, "Hey Andrew, what's your win rate." Or, "If I took daily charts, what's your win rate or one hour charts does that increase my win rate?" And the problem with win rate, although it might feel very nice and warm and fuzzy to say, "I've got nine out of 10 trades correct." The problem is with most people that I've ever seen that have very high win rates is their reward to risk on the trades is very small and all they need is say, one out of 10 trades to go wrong, and it's wiped out all the gains that they've made from the other nine profitable trades. So, having a win rate of let's say 90%, really doesn't mean a lot. And most people that I've seen over all the years of trading, actually lose money, bigger picture when they have high win rates. Although for most new people, it sounds like it's the most important thing. It really is not. High reward to risk is what counts. How do you achieve high R:R trades? But how do you do that, and how to do that in a practical, easy way? Well, some people might look at that and go, "Okay, to get a high reward out of my trade. I must have a very, very small stop loss. And every so often, you pull off a winning trade and it makes a high reward to risk." And you could do that if you really wanted to. The problem is your win rate on that will be very, very small because most of the time with a very small stop loss, your spreads or news announcements or something is going to take the trade out and you'll just end up losing so many trades. Using Limit Orders The easy way around it, and it's what we've done for years and years, is to use limit orders. So when you look at your charts, you can place a trade at the market, which means you're jumping in right now. You can use stop orders, which means on a buy stop, it means that you are putting a by trade in above the current price. Not really so good for high reward to risk. It's okay if you want to break out of a zone, let's say. But the trade that we use are limit orders. So I'm using a buy limit means here's the price right now. I like my setup, but I'm buying when the price goes lower than where it currently is. And it doesn't mean to say, you need to sit there, just watching for the price to drop, drop, drop. "Oh yeah, I'm going to press buy now." You don't do that at all. You see your setup that you like as a trade and you then, using the way that we trade, using fib levels, et cetera, we then put in a buy limit to buy the trade if the price drops to a certain level. And now of course we can just place that order and just leave the trade alone. We don't have to be there at that exact time when the price hits that level. The same thing in reverse with the sell.

Previous Episode

#412: Achieving Great Trading Results

Achieving Great Trading Results Podcast: #412: Achieving Great Trading Results In this video: 00:24 – At the airport today 01:13 – Sharing comments from clients 01:42 – XAU/USD MN1 trade closes for 10.1:1 Reward:Risk 02:14 – Weekly Oil trades hit profit targets 02:35 – Webinar with clients and profitable trades 03:30 – We offer daily trade suggestions to follow 04:11 – Another client makes fantastic gains 04:42 – Contact me [email protected] Forex traders, all we want is results, isn't it? Let's talk about how we are achieving results and how our clients are achieving great results right now. Hey, traders, Andrew here at the Forex Trading Coach with video and podcast number 412. At the airport today And as you can see, I'm at the airport, just been for a fly here and right behind me, we're about to get an Air New Zealand plane taking off. So, it may get a little bit noisy. I've just come inside the hangar. Now with results for me, that's what pays for this. Trading results pays for this, and without trading results, I can't make that thing fly. I couldn't have learned to fly without trading because of time to be able to learn to fly. I certainly couldn't put fuel in it. And that's one of my reasons why I trade, because I love to fly. And for you, it may be different. It may be time off. It may be time with the family, whatever it is, but you've got to get results. That's the important thing. Sharing comments from clients And I just want to share with you an email that came through last week from Sean, one of our clients, and he said, "Andrew, I've had a 8.44% gain this week, 11% for the month so far. Loving following the forum and the daily trade suggestions, helps cut out the leg work, which is good when you have limited time. Have a great weekend, Sean." So that's an 8.44% gain by Sean there and just shows what can be achieved. XAU/USD MN1 trade closes for 10.1:1 Reward:Risk We've had trades on our gold trade. Our monthly gold trade has just closed for a 10.1 reward to risk. Do you know that's one of the very highest reward to risk trades I've ever had personally? Half percent risk on that equals a 5% gain on my account from that one trade that took literally about 30 seconds to place. That plane will be taking off shortly behind me here, so it's going to get touch noisy for a second. We'll just let that plane go. And he's on the way now, so I can talk about more trades. Yeah. Weekly Oil trades hit profit targets We've had some oil trades that have done tremendously well. I don't trade oil very often, but if you look back on your charts, back in around the middle of April, WTI West Texas and Brent crude oil, both were really, really good trades, had great profit on them. One made a 3.7 to one rewards risks. One made a 3.5. So that's gone nicely as well. Webinar with clients and profitable trades Yesterday, I had a webinar with a client. They had a 12 hour chart trade, hit full profit on the Aussie Canadian. Yesterday, we mentioned a six hour chart trade for our clients on the pound US, which worked. We've had clients taking four hour charts that work. The beauty of this is, is it works regardless of the pair, regardless of the timeframe chart you are trading. We looked at the US dollar index. Again, not something we normally trade, but you look at Monday's candle or Friday's candle for Monday of this week on the US dollar index, it worked a treat. It works beautifully because the pattern is what works. We look for reversal patterns or we look for continuation patterns. That's all we're looking for. And it's really simple to trade, really simple to see. And therefore all you need to do as a trader, is look at the timeframe chart that is showing the right setup that we're looking for at the time. That's all you need to do. And... Sorry, as I'm driving my... Lucky I can fly the helicopter better than I can hold this gimbal.

Next Episode

#414: It’s Time to Get Real

It’s Time to Get Real Podcast: #414: It’s Time to Get Real In this video: 00:23 – Keep it real 01:04 – We fail to recognise the effort required to succeed 01:32 – A trading example 03:22 – You need to understand the market 04:42 – You need dedication and hard work As a Forex trader, you need to learn to get real. Let me explain more right now. Hey, traders, Andrew here at the Forex Trading Coach with video and podcast number 414. Keep it real Now, this is going to be all about getting real, keeping it real with your expectations. So, what we see online is everybody's success. We see lots of money being made in trading. If we're into sports, we see great sports men, great sports women out there having success, scoring the runs, taking the wickets in their cricket, winning grand slams in tennis, scoring tries in rugby, scoring the goals in soccer. With musicians, we see the great guitarists, the amazing singers, the drummer, all those type of things. We all see their success and we go, "Wow, wouldn't it be amazing too?" We fail to recognise the effort required to succeed But the problem is, is we don't see the hard work, the blood, sweat, tears, the dedications, their failures, their commitments behind the scenes to get to that level of success. Trading is no different. Trading does take work, dedication, commitment to learn how to do this properly. It is no different from being a fantastic singer or tennis player or whatever it is that you follow. A trading example A great example of that was something that I got sent just yesterday. Someone sent me a link to this Expert Advisor, so this robot that trades gold. I looked at it briefly and I thought, "That looks okay," and it had some quite good success. It was up 22% by taking these buy trades automatically on gold. Now this morning my time, which is now Friday, the 4th of June, gold has crashed. It's dropped quite a lot overnight, had a big fall. Biggest fall it's had in quite a long time. I looked at the results of this Expert Advisor this morning, it's now on its equity at 3.4% from mid-20s just yesterday. So, it's had about a 19% drawdown just today. Now the reality is, is you cannot absorb that, and so unfortunately most people won't see that, they'll just see it as ... they won't see it's an equity drawdown, and so they won't understand what they're looking for. So they think they can pay their $200 and off they go and this thing's going to magically trade for them, but there's no work involved in that, there's no understanding involved in that. That's the downside when you make things too easy. So I just wanted to highlight that, because I've seen it just an hour ago. Looked at the updated results and it's crashed. So, the problem is with that is they are not understanding the basic principles of trading, they're not understanding controlled risk, because those trades on that Expert Advisor, they're still open. If gold crashes again today and next week when you're watching this video, that 19% drawdown could be 20%, 30%, 40% drawdown, who knows. That's the problem when you don't know what you're doing or you're relying on someone else and you don't know how their system works. You need to understand the market So, the whole let's get real thing, you've got to understand the market. Now to be perfectly honest, we've had a pretty tough last few weeks on most of our charts. The market has not been kind to us, but we have very low controlled drawdowns and we have low-risk on our trades. We've seen personally the longer timeframes, the weekly and the monthly charts and the short timeframes, the one, two hour charts, four hour charts had some great trades on those, but in between, the six, eight, 12 hour charts and the daily charts have not been that good in the last few weeks, but we're real about that. Not every trade will be profitable, not every week will be profitable.