Profit Ratio in Forex TransactionThursday, October 1, 2009 4:51
Truly, how is the best profit / loss ratio in forex transaction?
Hm .. the question above, bother easy answer. Easy, right .. let’s say we want to have a profit / loss ratio = 2:1, so we just have to set the take profit and stop loss order accordingly. But, … the facts speak the other, especially in the forex market is so volatile, up and down like a roller coaster.
Okay, now let us ponder this question first … which is easier to gain. A little bit gain, but often, or big profit, and seldom. The answer should be a little bit lucky but often, even though he want a big profit and often (he.. he. . he ..)
Usually in every transaction we are to set a value, how much profit we want to accomplish and how much risk we ready to bear. OK, let’s say the ratio of profit / loss = 2:1, meaning for a profit of 200, we are willing to lose 100. In 10 x transactions, how likely is this happening? Say 3 x we reach the desired profit and loss x 7, so this is what we get 3 x 200 to 7 x 100 = - 100.
Now we try another approach, say the ratio of profit / loss = 1:2, meaning for every profit of 100, we are willing to bear the loss of 200. In 10 x transactions, how likely is this happening? let’s say we reach 7 x profit and 3 x loss, so this is what we get 7 x 100 to 3 x 200 = 100
Now, through the example above, which one is better? Once again, nothing is certain in this world, includinge foreign exchange transaction. We can not avoid losses, but the important thing is how we gain more often than the loss.
Always the best for us all!