What is a good ratio to start out with, 2:1, 3:1?
@mikebellafiore
I was asked this question during a recent Webinar, “Trading Fundamentals: Things Great Traders Do and Never Do”.
We teach our new traders to look for a risk/reward of 1×5. That means a downside of 1 for an upside of 5. More specifically you might risk 10 cents to make 50 cents. We do this so they are in the best and easiest trades when they begin. Remember, when you first start, this is the worst you will ever be as a trader.
As a trader gains experience then they can look for smaller risk/rewards of 1×3 or 1×2. As your risk/reward becomes smaller you should expect your win rate to become higher.
What is also interesting is that as you gain experience as an intraday trader, you will expand your Playbook to swing trades with a risk/reward of 1×10. So as you become more accomplished with your trading you will take more trades with a smaller risk/reward and find longer time frame trades with a higher risk/reward. This is your natural evolution as an intraday trader.
Related blog posts:
First Control Your Risk
Traders Ask: How Do I Stop Losing Money?
You can be better tomorrow than you are today!
Mike Bellafiore
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