Money rules the world and it is no wonder that every trader will be interested in what profit he can actually expect from trading. To do this you can use one extremely necessary tool called RRR (Risk: Reward ratio). RRR should be an integral part of money management for you.
Emotions need to be under control
When trading, it is essential to realize one thing in particular, namely that the market cannot be blamed for bad losses. Many novices or average traders do so. However, the professional knows that losses will come and are part of the market. He also knows that what will be the loss is mainly up to him.
Let’s look at the difference between betting and trading. The reason is that in betting the loss and profit are set by a third party (how much you earn, but also how much you lose). Whether it’s roulette or a football bet.
However, when trading, you determine the loss (using stoploss). Likewise, you determine profit by setting your plan, expected profit, and also using the RRR tool, which we will describe in more detail below.
The difference between professionals and beginners
The average trader assesses his risk through his last two trades. The professional does not care and does not make such a decision on the basis of the past. He knows that risk must still be assessed in the same way.
Only the best trader can turn the position and “cut the loss.” If trade goes against you, the market in other words tells you that you are wrong. It is therefore necessary to decide whether stubbornly to adhere decision or admit a mistake and change position with loss.
A professional trader, even if he loses and is at a loss, knows what it is. Of the 10 stores, even if he fails to be 5, he knows exactly how much he will lose (either 1%, 3% or 5%). But it has been calculated in advance and is reconciled to the fact that it may turn out. A professional probably will hardly be in a loss of 90% of any trade. Even though every trader has losses, it is necessary to be able to determine how big the loss will be.
RRR – Risk reward ratio
RRR is key to being able to manage your position correctly and to know what risk (and profitability) you are going to the business. It is a tool that you can find in tradingview or other similar platform.
This tool will determine how much risk you are going to the business and how much you can profit from it. So if the RRR shows you a value of 2, for example, think of it as risking one unit (Bitcoin, Euro, Dollar, anything) and getting 2.
Most traders recommend going to the RRR store of at least 1.5, but the ideal is to have above 2.5 to 3 (never enter below 1 because you risk more than you can get!). Of course it depends on each of you, but RRR is very important and you have to know which one suits you. From stoploss to expected profit.
If you want to become a professional trader, you have to be able to not only know RRR, but mainly to use it. Although it may not seem extremely important, most of professional traders point out that nearly 80% of successful trading is in the mind and is only about the psyche.