Nutrition means
As long as you’re satisfied with a risk-reward of 1:1, you’re nourishment
But with 1:1, if your win rate drops even slightly, you will sink.
People who start thinking about risk-reward first reach “1:1.” Make the stop-loss and take-profit widths the same. If the risk is 10 pips, the reward is also 10 pips. It looks balanced and seems good.
But, I’ll say it plainly.As long as you’re satisfied with a risk-reward of 1:1, you’re still at the nourishment stage.1:1 is by no means a safe setting. Rather, it is an unstable setting that can easily lead to losses with a small flaw. This time, I will explain why 1:1 is insufficient using numbers.
The win rate required by 1:1
When the risk-reward is 1:1, how high must your win rate be for overall profitability? The answer isa win rate exceeding 50%.
If profits and losses are of the same magnitude, capital will not increase unless the number of wins exceeds the number of losses. If the win rate is exactly 50%, you break even. Actually, because costs like spreads apply,you will lose at 50%.When accounting for costs, to win with 1:1 you need a fairly high win rate, such as 55% or 60%.
Win rate 50% → after costs, negative
Win rate 55% → just into the positive
1:1 assumes you can maintain a high win rate consistently.
If your win rate drops even a little, you quickly go negative.
※Numbers are approximate for explanation.
The problem is,maintaining a high win rate consistently is very difficultbecause market conditions are always changing. There are good periods and bad periods. It is normal for win rate to temporarily dip below 50%. With 1:1, you would lose each time that happens.