Review week 46: the power of risk-reward ratios

Result: 0R over 5 trades
I got 4 losing trades and only one winning trade. Still due to the power of good risk-reward ratios on these trades I managed to break even.

Let's look at the losers first.
My trade on the  USDCHF got stopped out at - 1R.
USDCHF- Long -1R
Than on Friday I closed out all open positions I still had. Market was slow and seemed to be going nowhere. I did not want to stay in the market over the weekend. So when I saw a change to get out at break even, I did. So I closed out the following positions at small loses:



All losses were offset by just one 2R winner on USDJPY.
USDJPY - Long 2R
I believe this shows the power of having a reward - risk ratio of 2 or greater. USDJPY now formed an inside bar again on Friday. So this would offer an opportunity to get long again at he break of the mother candle. I am trading continuations of the trend. Last week I saw below video. It is a recording of a webinar of Forex4Noobs. Nick the guy behind forex4noobs explains here why he trades reversal trades only and why it is so diffucult in current market conditions to trade trend continuations as I am doing. It really made me think about my method and why I find it so dificult to trade this method consistently profitable in this market. Actually, the only reason, I guess, why I am still breaking even, is because I apply good money / risk management.

So, having seen, heard, understood and agreed to Nick's analysis of the current forex market conditions I am considering to adjust my method in the following manner:
  • I will still trade continuations with same entry method
  • But I will set targets always just before S&R areas as current market conditions will most like result price to reverse from such areas.
  • As I will want to keep RR ratio to about 2 or more, I will also need to set smaller / tighter stops
So I will first set profit target based on up coming S&R lines and then set my stops at about half the TP target. I will then review the total trade setup, to see if all levels are still workable. Stops cannot be to close, meaning I cannot enter to close to S&R levels.

Have you noticed, how my only profitable trade last week was a continuation trade of the longer term bullish trend, but also a reversal trade on the sorter term bearish trend?