Podcast:

This Trade has a 14.6 Reward:Risk ratio

In this video:

00:29 – Selling the EUR/CAD on the Weekly chart

00:46 – I promote high reward:risk trades

01:33 – Money management is very important

02:32 – Low risk per trade is also important

03:39 – Trade with a 14.6:1 R:R profit target, currently at 6.4:1 R:R

06:16 – Understanding what you need to do in order to trade well

I want to tell you all about a trade that I've got on my platform right now that has a 14.6:1 reward to risk ratio. Let's get into that and more right now.

Hey traders, Andrew Mitchem here at the Forex Trading Coach with video and podcast number 361.

Selling the EUR/CAD on the Weekly chart

I want to talk about a trade that I've got on the weekly charts on the Euro/Canadian Dollar. We put it on our membership site on Monday. It has a 14.6:1 reward to risk ratio if it gets to its full profit target. More about that shortly.

I promote high reward:risk trades

But if you've been following me for any length of time, you know that I endorse and I suggest and I promote people look at trades that have a high reward to risk ratio. So what does that mean? So in easy numbers it means if you have a reward to risk of let's say 4:1, it means if you're risking 1 part you're making 4. So if you're risking 1% of your account, you're making 4%. For me, I personally trade at half of 1% risk per trade, is what suits me. So that means I'm risking one part, of half of 1% of my account, to make 4 parts, or 2% gain on my account if the trade gets to the profit target. It's very easy for you to do that regardless of your account size.

Money management is very important

To me, the biggest part of trading apart from having a strategy and a right mind set is to have that money management important that you get it right. So low risk per trade is very, very important but also high reward to risk is very important. So it means that I'm not always going to be right. I don't need to be right all of the time. In fact, the higher the win rate most systems the worse they are. Hard to understand that, but it's true. Think about it this way: there's no point in having a 90% winning system if you're losing money. Most 90% winning trade systems do lose money because they make lots of small gains, one big loss. I flip that around and go the other way. For me, something like a 40-50% win rate is amazing, because I have high reward to risk trades. Some are 2:1, some are 3, 4, 5:1. The one in particular that I'm going to talk about is 14.6:1.

Low risk per trade is also important

So low risk per trade is massively important also. I was looking at a post on Facebook, one of those sponsored links on Facebook, someone selling this new algorithm. It was really interesting to look into it, because it looked really cool. It looked really flashy, looked amazing. Then you look into it a bit further and I could see that they were risking 5% per trade. Now for the novice or for the completely financially person doesn't understand trading, 5% risk per trade doesn't sound like anything good or bad really. It's just looks really cool and you make lots of money. The problem is if they get three or four trades wrong in a row, they're 15, 20% down. If I get three or four trades wrong in a row, I'm 1.5 to 2% down. Massive difference especially up here and in here. Big, big difference. So if you're listening to the podcast, I was tapping to my head and my heart. So psychologically and emotionally, it makes a big, big difference.

Trade with a 14.6:1 R:R profit target, currently at 6.4:1 R:R

So, let's get onto this trade. It has a 14.6 reward to risk. It was taken this week, we published on our membership site just this week on Monday morning at the beginning of the week, selling the Euro/Canadian on a weekly chart. You can go and look at it on your chart, you can see the trade. The price pulled back perfectly to our entry level.