【Column④】Win rate and risk-reward ratio are inversely proportional…
This is a question I am asked very often, so I’ll introduce it.
“If you try to increase your win rate, your risk-reward ratio gets worse.”
If you try to raise the risk-reward, your win rate falls.
What should you do?”
The answer is already described in the “Electronic Medical Record of Trading Techniques.”, but
let’s firmly grasp the mechanism.
That is the topic this time.
And if you don’t resolve this here,it will never lead to “continuously earning.”That is the story.
Trading is fundamentally designed to be a loss.
I wrote this in the “Electronic Medical Record of Trading Techniques.”
This story isavailable in the free versionso if you’re curious, please read it.
“Electronic Medical Record of Trading Techniques” (Free Version)
https://www.gogojungle.co.jp/tools/ebooks/51625
Inside the “Electronic Medical Record of Trading Techniques” (Free Version)
the market is “up or down?” probability50％ nonetheless,the win rate50％ does not converge!
I explained the reason.
※For convenience, I label positive results as “wins” and negative results as “losses,”
and I use the word “win rate,” but I certainly do not equate
positive results with wins and negative results with losses.
From here on, what is written is in the paid version of the “Electronic Medical Record of Trading Techniques,” so I’ll summarize briefly.
Profit:Loss =1:1 when taking profits and stopping losses, the probability is50％.
However, in the market there is“fees”, so you start at a deficit and the probability50％ does not apply.
From the start, you are in a negative position—that is the market.
the win rate is below 50％.
the risk-reward is worse than 1:1.
In other words, you cannot earn continuously.
Amateurs often dream of
“I want to win every time.”
“I want to make a profit every time.”
and dream of it.
Sothe first goal is to increase the win rate.
Therefore, most people go on a journey to find a method.
They buy famous (fraudulent) products, join salons that claim to “win” or “be right” to drink in their sweet juice.
But win rate is not something that easily increases.
Even professionals who make profits every year wonder if it will rise or fall in the future.
Honestly, they don’t know for sure.
They only invest their funds at points where there is a higher likelihood of rising or falling.
They do not think every time they end with a positive result.
【Summary ①】
Win rate is not easily increased!
If you cannot increase the win rate, the next thing is how to increase the risk-reward.
To digress a bit… let me say this (-_-メ)
I have said this many times!
┐(´д｀)┌ Sigh…
The risk-reward is
that is the ratio.
Note: The basic notation for loss ratio is “1”
for every unit of risk, what is the reward?
You learned about “ratios” in elementary school, right?
Risk-reward = 2:1
means the ratio is 2÷1 = 2.
Risk-reward “2:1” is equivalent to risk-reward “2.”
Even a follower with 100,000 followers says this in reverse as well.
In this world, not understanding this…
Do not be deceived by such people.
Now, back to the point,
the discussion was about raising the risk-reward.
From risk-reward 1:1 (or even lower), to raise it, you can set profit-taking farther away and stop-loss closer, but…
let’s look at it in the diagram. ⇩
When the target is far, the probability of reaching it naturally decreases.
Therefore, if you try to raise the risk-reward, the win rate tends to decrease.
In other wordsyou could say it is an inverse relationship.
【Summary②】
Raising the risk-reward tends to lower the win rate!
In other words, it becomes “inversely proportional.”
So what should you do?
If you don’t have this answer, no matter how much you participate in the world of investment, you will never be able to “continue to earn.”
In other words,
“You are repeatedly engaging in gambling with poor returns.”
If you think about it that way, can you imagine earning money?
Then, for you to be able to “continue earning,”
is there no way to increase both win rate and risk-reward?
The answer to that is unique in the world.
It is not about technique.
If you are a true professional, everyone knows this.
If you studied the history of the market, everyone would know it.
There is no one who should not know.
However, books that write this answer are truly few in number.
So those who cannot reach it will end their investing life as perpetual losers.
I have never seen materials or instructors who clearly write this in products or salons.
If you want to know, please relearn from the history of investment.
If you want to know quickly, it is introduced below.
“Electronic Medical Record of Trading Techniques” (Paid Version)
https://www.gogojungle.co.jp/tools/ebooks/51626
If you’re interested, please feel free to take hold of it.
It will radically change your concepts of investing!
And there is a strong possibility that you will suddenly shift to a investing life where you can truly “continue to earn.”
It’s not about the technique!!!
Lastly, this turned into a bit of a promotional note, but
if you already know, there is no need to acquire it.
If you are currently “continuing to earn,” you should be doing this naturally.
If you want to completely transform your current investing life,
change your way of thinking!