The biggest thing is the difference in psychology / emotions / mind set between taking high RR's vs low RR's. High RR means your trading confidence isn't going to be balanced and it is going to encourage FOMO hugely imo. If trying to target 1:10 RR's the level of FOMO is going to be higher than taking 1:1 RR's, would you agree? Also the lower confidence which naturally comes with trading 1:10 RR's means that the risk per trade will be less imo. This means that for a 1:10 trade I may risk 0.3%, but for a 1:1 trade I'm happy risking 1%. This means I have to win 3 consecutive 1:1 trades for every 1:10 trade I win so it's not as glamorous as it seems. Add to that the stress will be higher trading 1:10's which isn't good for performance. Also 1:10 trades require much more discipline as you have to be more precise, you have to meet more entry criteria. In other words your entry criteria has to be much stricter than a 1:1 trade, combine that with low confidence leads to trading smaller lot sizes than usual as well which ultimately means your brain is tricked into thinking that you can stray from your strategy a little and maybe get more FOMO as a result. Also it's very easy to get 3 consecutive losses trading 1:10's which can be really damaging psychologically and ultimately lead to a revenge trade which can simply be a trade which strays from your strategy very slightly. Losses add up quickly. Finding 1:10's is much more of a waiting game, best way to trade high RR's is to: 1. learn about those specific setups which allow for them, 2. Not for them to be your primary method for taking money from the market and 3. Do not try so hard to look for them but allow them to appear to you gracefully * *Point 3 requires further explanation though as finding high RR setups takes a lot of focus, so it's a balance of conscious effort you apply to finding them - you need to look fairly hard but not too hard and obsessively that your ego get's in the way with an unwarranted directional bias - this fear of not getting that high RR is going to make your brain search rampantly like a squirrel trying to find his nuts.
Also, a lot depends on your holding period. A wider and optimal stop and a longer holding period to increase reward is another way to do it. The best of both worlds.
It's all about the stop loss. I think half the battle is working out the best place to put the stoploss. There are many variables. And also, there is a difference between the initial conditions that determine the initial SL, and later on into the trade actual conditions should cause you to re-evaluate your SL.
When trading facts (not probabilities), your stop is placed at an area that invalidates your set-up. Your trading strategy determines where you put your stops. If I trade OB on the 1min chart, then my stops are below the OB giving a tight stop it would not make sense to have a wider stop because as soon as price goes below my OB my set-up is invalid.
I understand what you’re saying but there are a few things to note about this. 1. This video is mainly talking to people who can’t stay consistent even with basic rules. In other words the people who spend all their time focusing and obsessing on getting the perfect entry and perfect risk reward when they haven’t tackled any of the other trading challenges that come with the job. I speak to people all the time who sometimes get awesome RR but can’t do it consistently and then doubt themselves as traders. 2. Even trading ‘facts’, it’s still a game of probabilities. When trading ‘facts’ sure your success rate may be higher but never 100% - therefore it’s probabilistic. 3. If you’re the type of person who can emotionally control themselves and has the time to refine entries down to the 1m that’s great, I’m happy for you ! :) however like I said in point one, most can’t even follow a simple set of rules for 1 month without changing something in their plan or without making mistakes and not following their rules. If these people then put all their energy into refining their entries over and over it won’t make them a better trader - in MOST cases it’ll just make them more emotional and make more mistakes. It comes down to preference at the end of the day and an understanding of the trader and their emotional tolerance. Have a great day!
haha well said Sam, people want to take 1:10 RR trades but cant even hold that entire trade without getting emotional and wanting to take their money out at a 1:1RR lol it's so sad... then again everyone wants to be pertained as a guru holding these long ass trades like the markets wont take it all away on one single 1hr candle after holding for a few hours
They arent taking the trades. They're putting up trading view photos after the move happens for marketing purposes followed by = " Struggling with trading? join our VIP service now for 50% off "
thats the key, you wouldnt get in losing streak most probably you end getting 50% right and 50% wrong, cause thats the probability of price at any point
@@monti242421 What do you mean by "wrong"? The probability of the next bar going up or down might be 50/50, but the probability of your trade winning is not 50/50. That you have to measure over 1000s of trades (aka winrate). Because, your trade will need multiple bars to close - and randomness comes in as more bars pass by with time.
@@paulbrown5839 probability of wining of any trade and losing is actually 50%, you use whatever ict, ob, super advanced manipulation candle sticks, supply and demand, whatever shit you learn, price either gets up or down, and in area of enginnering we took the maximum limit or maximum stress for safety purposes, that concept is valid here also, 50% probability is the safest limit here. And you are talking about price moving up and down yeah, if you use small sl then take small profit as well, but if you use wider sl, you would have a chance to cut before your sl. Cause if price does not goes to your target in a straight way, it will also not go to your sl in a stright way also. Wider sl gives you ability to take advantage of volatility in your favor, small sl gives you disadvantage of volatility. You can make 1:2 or 1:3 or more just by using 1:1 in most of the trade. Yeah it will hit sometimes directly but that is also 50% chance. Out of 100 trades you end up winnig by 50 trades, because of probability and out of losing 50% trades, lets say 50% directly goes to sl and another 50% you end up geting at breakeven. You done. Although direct goes to sl is is way lesser than 50%, cause it market movee volatile.
@@paulbrown5839 whatever you do, you will end getting 50% win trade 50 loss trade, so take the advantage of volatility by using 1:1 risk rewRd with long target and long sl, In 50% of losing trade you will end up geting in break even, in few you will end up giving full sl. Small sl simply telling thr market just move from here right away itt can be done but it cant be regularly.Why to give money to market regulary in order to beat it ir cheat it. I Mean if market does not go to your target right away, why it will go to your sl intantly, but with small sl, market will go to your sl instantly and move to your target pateintly.
Nice stuff Sam. Makes sense. I have a request. Is it possible to make a series of vids on exactly how you would go about passing a standard prop firm funding challenge using your approach? (Ie trade plan, risk reward profile, contingencies etc). You would pull in alot of loyal followers (with challenge pass funded money in their accounts=more business for you.. ;) ). Win, win. I have years of fx exposure, but no 10% in a month challenge consistency. Also covid has left me without job. So the challenge route is where my focus is. I'm sure many others are similarly positioned. Can you help? Thanks again.
Hi David, yes I’ve been considering doing a series of me taking the ftmo challenge for sure. I would advise not to focus on the money though, I’m sure you’ve heard it 1000 times before but it’s important. Meaning focus on the areas that lead to the results and focus on improving performance and slowly stacking skill sets rather than spending all your time worrying about strategy - that’s some advice in the meantime! All the best ❤️
It’s all relative to the strategy, there is no one size fits all. And yes the higher the RR, the more randomness of results you experience in the short to medium term
There are many strategies that work without stop losses as long as there is another form of risk management applied. You’ll always take losses with 98% of strategies so whilst you may hate it, still be prepared for them when they come
What do you think of negative R:R trades? Like with a -2:1, you're handed a 66.66% win rate on a silver platter. All you have to do is increase your win rate by at least 8% to be consistently profitable. I did countless simulations at this point that prove that if you have at least a 75% win rate with a -2:1, then you're consistently profitable. I think you can achieve that +8% by following trending markets on pullbacks. I'm not sure yet.
I’ve made many many videos about this topic in the last 4 months, I recommend you watch them for a detailed answer. Any risk reward can work, it’s mostly about a good risk management understanding. Also knowing that just having a negative RR increases win rate proportionately. Anyway, watch those videos, they’ll like help you :)
I've noticed this too. My psychology is so much better because I have a much higher winrate than when I went for 1:2 or 1:3. I'm more profitable now as well. Of course, I follow the trend and buy areas of value to help my edge.
I am all for the tight stop, because eventually the price will hit your stop and you will loose. When you have large stop that loss will be huge and you will think something is wrong with your strategy. Psychologically I prefer a lot of little losses to a one big loss. Secondly, large stops force you psychologically to have high winrate, that is almost impossible in the long run.
Psychologically you may prefer tighter stops and that’s totally ok! But your second comment is incorrect, I’ve got one more recent videos breaking this down. Win rate and risk reward are directly proportional, so the act of decreasing the risk reward increases the win rate and vice versa. The edge is whatever sits on top of that “break even rate”
@@PsychFXofficial Thanks for response. But what I meant if you are after wide stops, you are after high winrates. High winrate obsession is the number one indicator of an amateur trader.
@ high win rate obsession is a big indicator of an amateur trader, BUT (and it’s a big but) just because it’s an indicator of a beginner, doesn’t mean a professional can’t use it successfully. In the same way some professionals trade without any stop loss at all, obviously beginners do that too, but their outcomes are totally opposite due to differing skill levels
I agree highly Sam! They only share massive R:R coz it looks glamorous, but what goes on behind the scene such as a lot of losses, that will screw people's mind. I just play it safe and have a wider SL , but if i feel going to higher R:R i just drop down to lower TF ie, 1 to 5 min tf.
so would it be more profitable if we make the risk higher than the rewards? say a 5:1. it would be more likely to hit the profit target thn the risk target or am i wrong here?
Depends on your style honestly - no one size fits all. If you’d said that to me a year ago I would of agreed with you hands down and it’s not that I disagree, just it’s not the only way
@@PsychFXofficial If you do what 85% of traders do I assume you have accepted to settle for less. You are right its not the only way but I believe you can do better , we all can do better as traders. I am not trying to change your style but I hope you have not accepted less because you are doubting your abilities and what you can achieve.
Double your stop loss and cut Half of your position size. Your risk remains exactly same but probability of hitting SL might decrease by 10 times
But when it hits it wipes your gains
I’m glad I listen to this. I was starting to get sucked into the tight s/l world. This pulled me back. Thank you!
So glad to hear this, forget tight SL - they are a waste of time imo. Focus on consistency first and remember probability before risk reward.
Loves this, will give some great value to a lot of struggling traders
Exactly - thanks for watching :))
The biggest thing is the difference in psychology / emotions / mind set between taking high RR's vs low RR's.
High RR means your trading confidence isn't going to be balanced and it is going to encourage FOMO hugely imo. If trying to target 1:10 RR's the level of FOMO is going to be higher than taking 1:1 RR's, would you agree?
Also the lower confidence which naturally comes with trading 1:10 RR's means that the risk per trade will be less imo. This means that for a 1:10 trade I may risk 0.3%, but for a 1:1 trade I'm happy risking 1%. This means I have to win 3 consecutive 1:1 trades for every 1:10 trade I win so it's not as glamorous as it seems.
Add to that the stress will be higher trading 1:10's which isn't good for performance.
Also 1:10 trades require much more discipline as you have to be more precise, you have to meet more entry criteria. In other words your entry criteria has to be much stricter than a 1:1 trade, combine that with low confidence leads to trading smaller lot sizes than usual as well which ultimately means your brain is tricked into thinking that you can stray from your strategy a little and maybe get more FOMO as a result. Also it's very easy to get 3 consecutive losses trading 1:10's which can be really damaging psychologically and ultimately lead to a revenge trade which can simply be a trade which strays from your strategy very slightly. Losses add up quickly.
Finding 1:10's is much more of a waiting game, best way to trade high RR's is to:
1. learn about those specific setups which allow for them,
2. Not for them to be your primary method for taking money from the market and
3. Do not try so hard to look for them but allow them to appear to you gracefully *
*Point 3 requires further explanation though as finding high RR setups takes a lot of focus, so it's a balance of conscious effort you apply to finding them - you need to look fairly hard but not too hard and obsessively that your ego get's in the way with an unwarranted directional bias - this fear of not getting that high RR is going to make your brain search rampantly like a squirrel trying to find his nuts.
Well said, very thorough :))
Also, a lot depends on your holding period. A wider and optimal stop and a longer holding period to increase reward is another way to do it. The best of both worlds.
It's all about the stop loss. I think half the battle is working out the best place to put the stoploss. There are many variables. And also, there is a difference between the initial conditions that determine the initial SL, and later on into the trade actual conditions should cause you to re-evaluate your SL.
When trading facts (not probabilities), your stop is placed at an area that invalidates your set-up. Your trading strategy determines where you put your stops. If I trade OB on the 1min chart, then my stops are below the OB giving a tight stop it would not make sense to have a wider stop because as soon as price goes below my OB my set-up is invalid.
I understand what you’re saying but there are a few things to note about this.
1. This video is mainly talking to people who can’t stay consistent even with basic rules. In other words the people who spend all their time focusing and obsessing on getting the perfect entry and perfect risk reward when they haven’t tackled any of the other trading challenges that come with the job. I speak to people all the time who sometimes get awesome RR but can’t do it consistently and then doubt themselves as traders.
2. Even trading ‘facts’, it’s still a game of probabilities. When trading ‘facts’ sure your success rate may be higher but never 100% - therefore it’s probabilistic.
3. If you’re the type of person who can emotionally control themselves and has the time to refine entries down to the 1m that’s great, I’m happy for you ! :) however like I said in point one, most can’t even follow a simple set of rules for 1 month without changing something in their plan or without making mistakes and not following their rules. If these people then put all their energy into refining their entries over and over it won’t make them a better trader - in MOST cases it’ll just make them more emotional and make more mistakes.
It comes down to preference at the end of the day and an understanding of the trader and their emotional tolerance. Have a great day!
@@PsychFXofficial how would you define a SL?
@@BrightKhosa stoploss based on average true range
No consideration of volatility at the time you define your SL?
How's it going?
haha well said Sam, people want to take 1:10 RR trades but cant even hold that entire trade without getting emotional and wanting to take their money out at a 1:1RR lol it's so sad... then again everyone wants to be pertained as a guru holding these long ass trades like the markets wont take it all away on one single 1hr candle after holding for a few hours
Exactly! It’s just another sad reality about the trading industry as it stands. In time people will learn - I appreciate you brother 🙏🏼
@@PsychFXofficial haha so true bro, keep up the great content my man 🙌🏼😎
They arent taking the trades. They're putting up trading view photos after the move happens for marketing purposes followed by = " Struggling with trading? join our VIP service now for 50% off "
Better content than any trending forex guru's BS... like it very much. Thanks Sam
Appreciate it brother :)))
Not only tight stoploss is trade is low probability setup, but also high commision, because low size increases as SL distance decreases!
This concept is changing my psychology for the better and I believe will lead me to success 8 years into this madness lol
Definitely one of the best videos out here.
Problem is, if you have a wider stop ... and you get into a losing streak .. it will take you longer to get out.
Smaller position sizes can help in losing Streaks.
thats the key, you wouldnt get in losing streak most probably you end getting 50% right and 50% wrong, cause thats the probability of price at any point
@@monti242421 What do you mean by "wrong"? The probability of the next bar going up or down might be 50/50, but the probability of your trade winning is not 50/50. That you have to measure over 1000s of trades (aka winrate). Because, your trade will need multiple bars to close - and randomness comes in as more bars pass by with time.
@@paulbrown5839 probability of wining of any trade and losing is actually 50%, you use whatever ict, ob, super advanced manipulation candle sticks, supply and demand, whatever shit you learn, price either gets up or down, and in area of enginnering we took the maximum limit or maximum stress for safety purposes, that concept is valid here also, 50% probability is the safest limit here. And you are talking about price moving up and down yeah, if you use small sl then take small profit as well, but if you use wider sl, you would have a chance to cut before your sl. Cause if price does not goes to your target in a straight way, it will also not go to your sl in a stright way also. Wider sl gives you ability to take advantage of volatility in your favor, small sl gives you disadvantage of volatility. You can make 1:2 or 1:3 or more just by using 1:1 in most of the trade. Yeah it will hit sometimes directly but that is also 50% chance. Out of 100 trades you end up winnig by 50 trades, because of probability and out of losing 50% trades, lets say 50% directly goes to sl and another 50% you end up geting at breakeven. You done. Although direct goes to sl is is way lesser than 50%, cause it market movee volatile.
@@paulbrown5839 whatever you do, you will end getting 50% win trade 50 loss trade, so take the advantage of volatility by using 1:1 risk rewRd with long target and long sl, In 50% of losing trade you will end up geting in break even, in few you will end up giving full sl. Small sl simply telling thr market just move from here right away itt can be done but it cant be regularly.Why to give money to market regulary in order to beat it ir cheat it. I Mean if market does not go to your target right away, why it will go to your sl intantly, but with small sl, market will go to your sl instantly and move to your target pateintly.
Thank you, good video all is clear and understanding. And very big advice that all must be simple and consequentially.
Good luck and take care😉👍
I’m glad :) thanks
I can totally agree with you. I always say to my community, that the tight stop is a self sabotage. Great video 👍🏼
i really love this, you are soo real with this analysis, good content
Nice stuff Sam. Makes sense. I have a request. Is it possible to make a series of vids on exactly how you would go about passing a standard prop firm funding challenge using your approach? (Ie trade plan, risk reward profile, contingencies etc). You would pull in alot of loyal followers (with challenge pass funded money in their accounts=more business for you.. ;) ). Win, win.
I have years of fx exposure, but no 10% in a month challenge consistency. Also covid has left me without job. So the challenge route is where my focus is.
I'm sure many others are similarly positioned.
Can you help? Thanks again.
Hi David, yes I’ve been considering doing a series of me taking the ftmo challenge for sure. I would advise not to focus on the money though, I’m sure you’ve heard it 1000 times before but it’s important. Meaning focus on the areas that lead to the results and focus on improving performance and slowly stacking skill sets rather than spending all your time worrying about strategy - that’s some advice in the meantime! All the best ❤️
@@PsychFXofficial goodstuff. Thanks for getting back. Looking forward to your vids
I have tried risk reward ratio of 3:1 works best Not being hit regularly.
It’s all relative to the strategy, there is no one size fits all. And yes the higher the RR, the more randomness of results you experience in the short to medium term
My stop losses are magnetic! I rarely use them for this reason. Not saying it's a good idea but I can't stand being stopped out.
There are many strategies that work without stop losses as long as there is another form of risk management applied. You’ll always take losses with 98% of strategies so whilst you may hate it, still be prepared for them when they come
@@PsychFXofficial Thanks for responding! This is the best channel.
What do you think of negative R:R trades? Like with a -2:1, you're handed a 66.66% win rate on a silver platter. All you have to do is increase your win rate by at least 8% to be consistently profitable. I did countless simulations at this point that prove that if you have at least a 75% win rate with a -2:1, then you're consistently profitable. I think you can achieve that +8% by following trending markets on pullbacks. I'm not sure yet.
I’ve made many many videos about this topic in the last 4 months, I recommend you watch them for a detailed answer. Any risk reward can work, it’s mostly about a good risk management understanding. Also knowing that just having a negative RR increases win rate proportionately. Anyway, watch those videos, they’ll like help you :)
@@PsychFXofficial Thanks
I've noticed this too. My psychology is so much better because I have a much higher winrate than when I went for 1:2 or 1:3. I'm more profitable now as well. Of course, I follow the trend and buy areas of value to help my edge.
Why u couldn’t say that sooner
Sorry!
I am all for the tight stop, because eventually the price will hit your stop and you will loose. When you have large stop that loss will be huge and you will think something is wrong with your strategy. Psychologically I prefer a lot of little losses to a one big loss.
Secondly, large stops force you psychologically to have high winrate, that is almost impossible in the long run.
Psychologically you may prefer tighter stops and that’s totally ok! But your second comment is incorrect, I’ve got one more recent videos breaking this down. Win rate and risk reward are directly proportional, so the act of decreasing the risk reward increases the win rate and vice versa. The edge is whatever sits on top of that “break even rate”
@@PsychFXofficial Thanks for response. But what I meant if you are after wide stops, you are after high winrates. High winrate obsession is the number one indicator of an amateur trader.
@ high win rate obsession is a big indicator of an amateur trader, BUT (and it’s a big but) just because it’s an indicator of a beginner, doesn’t mean a professional can’t use it successfully. In the same way some professionals trade without any stop loss at all, obviously beginners do that too, but their outcomes are totally opposite due to differing skill levels
Stick to lower rr if you dont know how to refine
I use no hard stop loss. When I started doing that, I became profitable.
I’ve heard this a lot, would you be up for doing an interview for the channel?
@@PsychFXofficial Absolutely
8:46
I agree highly Sam! They only share massive R:R coz it looks glamorous, but what goes on behind the scene such as a lot of losses, that will screw people's mind. I just play it safe and have a wider SL , but if i feel going to higher R:R i just drop down to lower TF ie, 1 to 5 min tf.
Exactly! Cheers for watching
I bet vertex would disagree with this.
Good for them, everyone should have their own opinions ;)
so would it be more profitable if we make the risk higher than the rewards? say a 5:1. it would be more likely to hit the profit target thn the risk target or am i wrong here?
No a 1:5 would be less likely
Sam my win rate is good but when the loss happens it can be drastic how to fix that
It’s about finding a balance between win rate and risk reward. Focus on risk management strategies
work hard until your RRR 1:3 or more.
Depends on your style honestly - no one size fits all. If you’d said that to me a year ago I would of agreed with you hands down and it’s not that I disagree, just it’s not the only way
@@PsychFXofficial If you do what 85% of traders do I assume you have accepted to settle for less. You are right its not the only way but I believe you can do better , we all can do better as traders. I am not trying to change your style but I hope you have not accepted less because you are doubting your abilities and what you can achieve.
Ahha yeh it’s all good, I’m not saying I never have high RR obviously, this is for beginners and those who can’t get consistent
@@PsychFXofficial yes sir