Why is it important to have a consistent RRR?
Do you have fixed RRRs for your trades, or do you prefer not to address this aspect of trading and set your Stop Losses and Take Profits in a different way? If you want to achieve consistently good results, you should learn how to work with your RRR, set it to an appropriate level and stick to it long-term.
Consistency, a simple approach, a tested strategy, a trading plan, discipline or psychological resilience are the most frequently mentioned factors that directly influence success or failure of Forex traders. However, one of the underestimated factors remains the Reward to Risk Ratio, which is one of the most important tools of money management and risk management for every trader.
Do you have the RRR set properly?
You have probably read articles on what RRR is considered to be best for Forex traders, with the most commonly recommended RRR being 3:1 or 2:1. These are reasonable values where a trader can be quite conservative in setting his SL (it doesn’t have to be too tight), and Take Profits at the same time don’t have to be too hard to achieve.
A higher RRR is not the basis for success
While a higher RRR looks great on paper, only a few traders are able to maintain it consistently over the long term without closing their positions unnecessarily early or “managing” them in some other way. Yes, it’s great to make 10 times what you could lose on a trade. However, in reality, this means that you will either set a very tight SL or you will rarely get close to your Take Profit, which can be very challenging psychologically. So you will make a relatively large amount of money in one trade, but the series of losses that will precede it can be hard to digest for many traders.
Some people, on the other hand, may be comfortable with a lower RRR, such as 1:1, because it is important for them to make profits more often, even if their profits are not very high. Again, it’s all about psychology. In general, some perfect RRR universally suitable for all traders cannot be determined. Everyone has a different preference and risk profile, and the appropriate RRR will depend on that.
Consistency as the basis for success
When we talk about consistency as one of the basic factors of a trader’s success, we also mean consistent RRR, which a trader should clearly set according to his preferences and trading goals. With a consistent RRR, a trader can predict the probability of success of his trades and can calculate the percentage of successful and unsuccessful trades he needs to be profitable in the long run. At the same time, he can avoid trades where the risk is too high relative to the potential return, which again limits the number of unnecessarily losing trades. All of this will help him to fine-tune his strategy and ultimately give him the psychological comfort that is critical to long-term profitability.
Improved FTMO Quick Trade Manager
For those who want to enter orders exactly according to the set rules even in the MetaTrader application and do not want to use various formulas or calculators for calculations, at FTMO we had created the Quick Trade Manager application. In addition, an updated version of the application was released a few days ago and it includes several improvements.
Traders who use MT4/5 (cTrader includes this tool in the basic settings already) will have a tool which will help them to to speed up and to simplify their order entry with pre-set SL and TP values. Those who want to be truly in control of the trade can also pre-set Trailing Stops and Break Even values, as well as the Offset, which is a value that will cover the cost of the trade such as spread, commission, or swaps.
This app was created for those traders who want to maintain a consistent RRR value for their trades. Thus, each trade can have a different value in lots, depending on the amount of points of the set SL and TP, and the calculation is fast and requires only a few “clicks”.
FTMO developed a 2-step Evaluation Process to find trading talents. Upon successful completion you can get an FTMO Account with a balance of up to 200,000 USD. How does it work?.