*No one wins 100% of the time, and the top 1% of traders in the world know this. That is why successful traders view themselves first as risk managers and only secondly as traders.*
Definition : The risk-reward ratio is the relationship between the risk of any given trade and the potential reward. Usually, it is advisable to establish trades with an asymmetrical risk-reward ratio because, in that way, you can have a small win percentage and still be profitable.
However, the goal should be defined based on the market structure and not at a random level. For example, if a long trade is getting closer to a resistance area, it would be good to take profits because a reversal to the downside is likely to happen.
Nevertheless, it is important to keep in mind that the trading strategy defines how the profit targets will be managed. Usually, some methods of profit-taking are:
â Close the entire position at a pre-defined level. â Close a percentage of the position and let a runner go with a trailing stop method. â Let the full position be managed by the trailing stop method, so the exit is executed when the trailing stop-loss is triggered.
