My risk-reward [Yuzukko]
What matters in FX is how to minimize losses and secure profits over the long term. Even with a high win rate, it is meaningless if total results are negative. Traders who survive in the market strictly adhere to the idea of big gains and small losses. This time, we ask FX trader and 4-panel manga artist Yuzukko-san to teach us about risk-reward concepts.
※This article is a reprint and revised edition of an article from FX攻略.com, November 2019 issue. Please note that the market information written in the text may differ from current market conditions.
Yuzukko-san Profile
After graduating from a private university with a law faculty degree, I worked in school meals for 1 year and in clerical work for 7 years. Feeling discomfort with working full-time until retirement, I began studying FX during maternity leave. I became a freelance trader in April 2017 after leaving my salaried job at age 29. My current titles are FX trader, manga illustrator, and snack shop owner.
Blog：https://yuzuusagi.com/
Twitter：https://twitter.com/yuzukkofx
Profit balance matters more than win rate or profit
People often ask, “What’s your win rate?” or “What’s your monthly return?”, but not many ask, “What’s your risk-reward ratio?” From this fact, it may be that many people care more about how much they earn rather than the balance between losses and gains.
How I became aware of risk-reward
When I was a FX beginner, I asked a full-time trader, “I don’t know where to exit.” He replied, “Exits should be decided in advance.”
That made me realize that I couldn’t win reliably because I hadn’t decided where to exit. I would place stop-losses as soon as I entered, but exits were decided by mood. I was focused on entering and hadn’t decided where to exit.
From that day, I started collecting data on how many pips a trade would move after entry, what time and minute the trend would settle, and the volatility data for each market. With this data, I could estimate how many pips the price would move in a given time frame. In other words, I could determine where to exit.
