Hi Buddy
As I say, it is each personal choice, which model to use. What I posted, was a judgment or overlook of all trades. By the way, it is not 1:2 or 0.1 : 1. It is 2:1 and 1:10 as I wrote it the wrong way.
I will give you an example direct on the future, as I use the options mostly to hedge my strategies. The calculation with options and futures would even look different. But let it make me simple.
If I go in any detail in my market it looks like that :
Each point has a value of 31.25 $.
Each example is for one trade.
Each example is traded with one contract.
Initial risk : 5 point = 156.25 $ ( Which is the stop loss )
Initial profit target : 28 point = 875.-- $
Realized Gain/Loss : 15 point = 468.75 $
Risk reward 3:1
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Initial risk : 5 point = 156.25 $ ( Which is the stop loss )
Initial profit target : 40 point = 1'250.-- $
Realized Gain/Loss : -5 point = -156.25-- $
Stopped out
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Initial risk : 5 point = 156.25 $ ( Which is the stop loss )
Initial profit target : 22 point = 687.50 $
Realized Gain/Loss : -5 point = -156.25-- $
Stopped out
--------------
Initial risk : 5 point = 156.25 $ ( Which is the stop loss )
Initial profit target : 15 point = 468.75 $
Realized Gain/Loss : 15 point = 468.75 $
Risk Reward 3:1
---------------
Initial risk : 5 point = 156.25 $ ( Which is the stop loss )
Initial profit target : 40 point = 1'250.00 $
Realized Gain/Loss : 46 point = 1'437.50 $
Risk Reward 9:1
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In five trades I have risked a total of 781.25 $ ( 5 x 156.25 $ )
I have made in five trades a total of 2'062.50 $
My total risk reward of all this trades have been 2.5 : 1.
As I not have made this 2062.50 $ in one trade, I also not can say, that I only risked 156.25 $. I had five times to risk 156.25 $ to make the 2'062 $
But as I say, that is our way to look at our risk reward ratio and we choose d that model.
DanPickUp
