Get Consistent Profit Using Risk Reward Ratio
The risk to reward ratio is a comparison of the risk loss limit and profit target in every transaction a trader makes every time he opens a trading position. Before making a transaction, the first thing that must be done is to see if the conditions for opening a position have been met, the price movements have been according to the analysis, the capital and leverage are sufficient and according to capabilities, etc. Then, determine the amount of risk that you dare to bear. Usually, the risk of loss is between 2-5% of the capital balance. After determining the risk, then determine the target or trader's profit limit using the RRR (Risk Reward Ratio).
Apart from controlling losses, RRR can also help traders generate consistent profits. As a novice trader, maybe a trader can determine what range the trader's profit is. Therefore, traders need to use RRR with a higher reward ratio than risk, namely 1:2 or 1:3. With this higher ratio, traders have the opportunity to earn consistent profits even though the winning rate for traders is low, or below 50%. This is because a trader's transactions have 2-3 times the chance of profit, so they are still profitable overall even though the transactions that are profitable are less than the losses.
The risk reward ratio serves to measure how profitable the performance of a trader or investor is with the strategy they have. Traders usually use this approach to plan which trading tactics are best. Usually traders use the win rate ratio in trading. But its use is less relevant and does not reflect overall performance. Many traders place too much emphasis on winrate and don't understand that winrate has its drawbacks. In this case, the advantage of the risk reward ratio is used to complement these deficiencies.
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