Its something brilliant to finally realize you only need a small bag of medium-large wins each year to succeed at trading. As a result of the liquidity and ease with which a trader can enter or exit a trade, banks and or brokers offer large leveragewhich means that a trader can control quite large positions with relatively little money of their own. I know many members who have used the concepts of risk reward etc, to turn there trading around, I really think this is important. I have, after 3. With regards to this invaluable lesson, as a member I appreciate your ongoing support and lessons, as well as the clear and concise KISS principals you apply. Become a fan on Facebook.

Over the last two weeks I have conducted a trading experiment in order to prove a point to anyone out there who might be in doubt of the power of risk reward combined with price action trading strategies. This article will take you on a journey into my mind and will hopefully prove to you that if you simply implement proper risk reward and have a willingness to learn a high probability trading strategy like price action, you have all the ingredients to become a consistently profitable forex trader.

This article will open your eyes, I suggest you read it, start to learn about the concepts discussed. In order to first demonstrate and prove the power of risk reward, I decided to randomly enter 20 trades over the last 2 weeks in the EURUSD, GBPUSD, and AUDUSD on a demo account. No price action setups were used, nor was there any method or strategy of any kind implemented when entering the market.

The parameters were simply to enter one of the above three currency pairs a total of 20 times within 10 trading days using a stop loss of 50 pips and a target of pips for each trade, making a risk reward of 1 to 2 on every setup. Note, the 20th trade was at breakeven at the time of this writing and I did not have time to wait for it to close out, I counted it as a winner, I will update this article if it ends up becoming a loser when it closes, although this will not change any of the implications or insights of this article.

While this experiment was meant to prove the power of risk reward, it was also meant to prove the power of price action trading strategies combined with risk reward. My results showed a small profit after entering randomly 20 times findex com stock price a risk reward of 1 to 2 on every trade, this after having lost 12 out of 20 trades.

What is the lesson to learn here? While the trade history above certainly proves the true power of risk reward, we have to ask ourselves how much better we could do by applying a true edge in the market, like the edge we get from trading price action setups. So, we know that risk reward strategies work, there is no doubt about that at all; you randomly enter the market and if you make at least 2 times your risk on your winning trades, you will likely breakeven or turn a small profit over a series of trades.

When we combine this knowledge of the power of risk to reward with a high-probability edge like stephen j young forex trader strategy action, what we have is a professional money management and trading strategy, which when combined with the proper education and discretion will make money over a series of at least 20 trades or more. Most traders do not implement risk reward properly; they take profits of less than 2 times risk which inherently forces them to have a very high overall winning percentage to make money.

If you actually do this with discipline, by only taking obvious price action setups and rigidly implementing a risk reward of at last 1 to 2, you will become profitable over a series of trades. The key is to not get discouraged if you hit a few losers or become over-confident if you hit a few winners. What if you lose on the first 8 trades out of 20?

Look at the results of my trading experiment above; did you notice that I lost on 9 trades in a row before hitting a series of winners? Other than being able to control your emotions and remaining disciplined enough on a consistent risk of trading forex made to not over-leverage or over-trade and implement proper risk reward on every trade, the biggest variable that can influence your trading success is whether or not you know what your edge is and when you should trade it.

This is where proper forex trading education on a high-probability trading strategy like price action comes in. I have been successfully using simple yet effective price action setups to trade the markets now for years, and I teach other traders exactly how I trade in my forex trading course. When you combine my price action setups with a thorough knowledge of risk reward implementation and a mastery of trading plain vanilla price charts, you will begin to think like a professional trader.

Pro traders see the market in a completely different way than amateurs do; they do not over complicate anything. First they check the market to see if their trading edge is present; if it is not present then they leave the computer or not look at the charts for a period of time, typically at least 4 hours. If their trading edge is present, they will then move on to the next factor to check; whether or not a risk reward of at least 1 to 2 is logically attainable.

Amateur traders get caught up on each trade; they react to the emotion of each loser or winner because they simply cannot see the forest for the trees, typically due to a lack of experience and insight. When you combine the price action and risk reward strategies that I teach with a healthy dose of self-discipline and trading experience, there is virtually nothing that can stand in your way except your own lack of self-control.

If you would like to learn more about how I trade the market with price action setups and risk reward scenarios, please check out my price action forex trading course. This is a really really good article. I no longer keep checking the charts and fidget over trades, it is quite a freedom! Its something brilliant to finally realize you only need a small bag of medium-large wins each year to succeed at trading.

I dont stress if a month goes by with nothing — no trades, no winsno losses ; It feels great to be able to wait for the next month and not worry if the setups will be there, because I know they will eventually. Results are skewed as sampled population remains small but as it continues on it finds balance in the seemingly complex randomness eventually returning to breakeven over the long term and then minus the spread its unprofitable.

I can say without a shadow of a doubt that IF you are profitable it comes from your entry and exit Chris, thanks for your views. I agree with Chris I too have tested this senario over a 10 year period. Also somepairs were significantly poor. Generally :- The risk to reward should reflect the type of strategy you are using. A breakout type strategy would have a better risk to reward but lower win percentages. Reversal generally has a better win but less less risk to reward. Also I agree with entry exit with more emphasis on exit.

Risk of trading forex made of people talk about entry but with out good exit it will make no big difference. An exmple of this would be conners 2 period RSI. A set stop gives you poor results. ATR is a little better, combined with a moving average it increases significantly, you could try a trail of some sort. The point is the exit is as important to the entry.

Static set stoplosses in my opinion are open to whipsawing. But just because I cant get it to work doesnt mean it doesnt. Keep in mind I never really like to make HARD rules about the market these are generalisations, I find what maynot have worked in the past given my new found experience knowledge will often work in the future. Its the systems wholistic conbinations that make it a better system. Combining this with a R;R provides an Expectancy value of 0. Trust this makes sense.

Aiming for breakouts with attendant false breaks may provide higher R:R but also lower win rates. The only component that can be computed is how much you are willing to lose on a trade. Even then you could get a gap that will skew that number as well. In a market with random entries, setting a risk reward or any other ratio will result in zero profit, less the cost of trades when tested over a large number of trades.

This is because the probability of price hitting the stop is inversly proportional to the distance of the stop from the entry point. Also 20 tests are not neary enough to give your test any sort of statistical validity. At least a few hundred tests would typically be required. The fact that you obtained a small profit from this test is purely luck. It could have just as easily ended in a lost.

What you correctly say is that it is the edge, due to your high probability entry that determines the outcome. It is also this edge that enables you to take advantage of a risk return ratio of or whatever. In other words there is no intrinsic edge in how you sets your stops. These views are true. Samples are not enough and results could have ended in a loss or breakeven. But the point of this article is to prove that with proper risk reward, even random entry has a chance to win or not loose, whereas without it and consistent good money money management losses are almost guaranteed, which is why most traders struggle and fail.

Great article as usual Nial! Do I increase or reduce my position size? Thanks again for your insight! Very helpful article Nial. This lesson gave me a different view on how I should apply my trading strategy, it shows a stress free trading on a professional approach. Thanks for sharing you are a blessing! This is the PIVOT in trading that every other wheel revolves upon.

Hi Nial your knowledge and experience sticks out. There is one point that needs to be asked when taking it from scientific approach as should be: I think it is safe to say that risk of trading forex made Risk-reward will result lower SR and vice-versa, reducing the RR will increase the SR. Have you looked at such optimization? Did you try working your PA strategy on different combinations for example risk-reward of ? Is is the ratio that you recommend for your PA strategy? I have just started demo trading and am finding your stuff the most helpful of all I have looked at.

I am feeling so relaxed with this idea about price action and Love how it works out. I am putting it to use But must say it is the easiest I have ever heard of. The only thing I would have liked to know is whether your decision to buy or sell was also completely arbitrary or judgement based. Slight bias to trade with recent momentum on 4 hour chart, but really it was completely a random entry.

I would say this is the best article you have ever. Instead of getting hung up on each trade individually. I need to evaluate many trades over time. I always talk myself out of trades not wanting to lose but I need to take all the valid trades and let the risk reward work out. I really enjoyed writing this article. I know many members who have used the concepts of risk reward etc, to turn there trading around, I really think this is important.

Risk reward and sticking to the trade is the key. I think that this, the risk to reward, is the KEY. This one is no different, succinct and no messing around. I have a habit to do at least 3 trades a day. Huge, Huge, Huge turning the corner, information! This should be read and re-read often. I feel this is the one thing that is holding back many traders that are so close to becoming consistently profitable.

Just the logic alone in this article is powerful enough to snuff out any and all of the typical trading emotions that so often hold us back. Thank you Nial for what you are doing. Spot on again Niall. I get lots of emails but my pulse quickens when i see one from you because i know it is going to be crystal clear instruction on price action trading which i feel i am really beginning to get a handle on from your generous teaching.

Thank you so much i will become a subscriber soon! This rang a bell because I never quite grasped the importance of at least a 1 to 2 plus risk reward. I thought that would be nice. I was thinking and wanting to believe I could achieve a higher successful trade percentage because professional traders had better odds. Thanks for sharing results of your experiment. Rather clear and to the point. I enjoy each article. I am now compelled to comment for two reasons; most importnantly is to give my heart out to the nice and loving people of Australia, to tell them that we feel what they are going through at the moment.

The current global events: i. God loves you, and you will all come out of this stronger Amen. Hope to see more of me soon. From Nigeria Every now and then a gem of wisdom graces my screen. This is one of those AH AH moments. You seriously have my attention. Hi Nial, First thing i just like send out my sympathies to all australian, hope they can get over this soon. I must say that since i have been applying your price action method to my trading it just gets better week in week out… nice one mate, best regards… WOW!!!!

Hai Nail, great highlights that you brought up. But sometimes, when we use price action method, for example indside bar on daily TF, we found that the SL sometimes is more than Shall we set the PT to ? It will all depend on the chart, if a pip profit looks possible, and the setup is valid, then if you are using a pip stop. However, alot of the time, we have the ability to tweak the stop loss to be less pips, and that means the target will become less.

If your trading the daily chart, and looking for a 2 to 1 risk reward, then there just make sure the chart, levels and trend allow for this. You would ideally be trading in a trending market. Thanks Nial, You are risk of trading forex made, I just enter the market and use your tools and make some improvement out of it. Sorry for your people having difficulties. Every time I read one of your clever articles I get a deeper understanding about trading.

Your cut and clean approach to trading is far useful that all that bunch of books that I have read until now. My best wishes for you and your people in this difficult times in Australia. Hi nial,great article nial,sitting over here in england you just do not realise how bad the flooding is in queensland. It is heart breaking peoples live,s turned upside down,not alot you can say except to pray and remain positive.

This article is so powerful! It has just nailed the spot where my thinking is right now, and has given me greater momentum on the trader forex malaysia 800 to becoming a professional trader Thank you for your constant sharing. Very productive lesson on risk reward and how PA can make it work in our favor. Hope the floods end soon. May God bless and comfort the flood victims. The experiment is impressive. I would also like to express my sympathy to those who have been flooded out in Australia.

A disaster of a most devastating nature indeed. I pray that those who are alive will get the strength to overcome and move on with their lives. May God give the flood victims strength and courage. What I would like to know though is, did you take these trades with any biases, or you just bought or sold blindly regardless of market direction? Thanks Niall for the perspective on Queensland. I did not realise the extent of the devastation. May God be with all concerned, our hearts go out to all Australians.

With regards to this invaluable lesson, as a member I appreciate your ongoing support and lessons, as well as the clear and concise KISS principals you apply. Anyone still in doubt about joining this community, THIS IS THE REAL DEAL. Keep up the good work Niall!! There are no lagging indicators with price action! No messy charts full of lines! Just a simple approach which helps limit emotion and maintain discipline.

Thank you Nial for this course and the willingness to teach your methods to help us become better traders. I bow to you if you do better. And all so true. Thanks for all the great articles you write!!! An excellent lesson Nial! It gives me even more enthusiasm to do some experimenting along the lines of your 20 trades with at risk of trading forex made no PA signals, then another 20 with any PA signals — even risk of trading forex made ones — and finally another 20 with only quality PA signals as a condition of entry.

All on demo account, of course. Your lesson also encourages me to be even more disciplined with my real account order entries and exits! I love your intelligent, yet not overly complicated approach to Forex itself and Forex lessons. Please keep the lessons coming! Your email address will not be published. Notify me of follow-up comments by email.

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We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results. By Nial Fuller in Forex Trading Articles 74 Comments. Obtaining the proper training is the key. Why Do Most Forex Traders Lose Money? Now I want to hear from you!

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Forex. My 300 pips Profit with Simple News Trading Strategies is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # ). Forex trading involves significant risk of loss. Zulutrade helps you build strong Forex Trading Strategies. Evaluate, test and copy the trades of expert leaders. A Case Study of Random Entry & Risk Reward. Over the last two weeks I have conducted a trading experiment in order to prove a point to anyone out there who.