Thoughts on negative RRR

Jajaofopobo

Trader
Sep 6, 2021
63
7
24
What are your thoughts on a negative RRR(the least being a 1: 0.5)?
Going through my trades history, though a little profitable (small margin) cos i use a 1: 2.5. Looked at it from a 1:0.5 lens and like all almost all were in profits.
Is negative RRR sustainable at the long run?
 

NatureGirl

Trader
May 3, 2023
85
13
24
22
a negative rrr like riskin more to make less kinda works if Ur winnin a lot but its super risky and U gotta be on top of Ur game to keep it profitable.
 

Enivid

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Nov 30, 2008
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No such thing as a negative RRR unless you are putting your TP in a loss.

You are talking about RRR less than 1. Absolutely no problem with that as long as your profit expectancy is positive. I'd say it preferable to have higher win rate with lower RRR than lower win rate with higher RRR if the expectancy is the same in both cases.
 

Antho

Trader
Mar 16, 2023
25
1
14
23
What are your thoughts on a negative RRR(the least being a 1: 0.5)?
Going through my trades history, though a little profitable (small margin) cos i use a 1: 2.5. Looked at it from a 1:0.5 lens and like all almost all were in profits.
Is negative RRR sustainable at the long run?
A negative RRR (risk-to-reward ratio), like 1:0.5, means you're risking more to make less, which is generally seen as unsustainable in the long run. While it might show more wins in the short term and can be tempting, it often leads to wiped gains with just a few losses. Successful trading strategies typically emphasize winning more than you're risking, ensuring a buffer for inevitable losses. Consistently profitable trading is more about managing risk than capturing every possible win.
 

Enivid

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Nov 30, 2008
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A negative RRR (risk-to-reward ratio), like 1:0.5, means you're risking more to make less, which is generally seen as unsustainable in the long run. While it might show more wins in the short term and can be tempting, it often leads to wiped gains with just a few losses. Successful trading strategies typically emphasize winning more than you're risking, ensuring a buffer for inevitable losses. Consistently profitable trading is more about managing risk than capturing every possible win.
That's incorrect. Some professional trading strategies (like option writing) involve extremely low risk-to-reward ratios.
 

Antho

Trader
Mar 16, 2023
25
1
14
23
That's incorrect. Some professional trading strategies (like option writing) involve extremely low risk-to-reward ratios.
You make a valid point about specific strategies like option writing, where professionals might employ low risk-to-reward ratios successfully due to their expertise in managing and mitigating risk. It highlights the diversity in trading approaches and the importance of context and skill level. My emphasis on higher risk-to-reward ratios is more of a general guideline, especially for those new to trading, to foster a sustainable mindset toward risk management. However, I appreciate the reminder that, with the right knowledge and experience, there are exceptions to every rule.