Risk:Reward - Why You Can Be Wrong More Than You're Right
A trader who's right only 40% of the time can still come out ahead - if the math is set up correctly.
Risk:Reward ratio compares how much upside you're targeting to how much you're risking. A 2:1 ratio means the target is twice as far away from entry as the invalidation level is.
With a 2:1 ratio, you can lose more trades than you win and still be profitable overall: 4 losses of 1 unit each (-4) vs. 3 wins of 2 units each (+6) nets +2, even at a sub-50% win rate.
This is why BullYeah's Swing Board always shows Risk:Reward alongside the Entry/Invalidation/Target levels - the win rate alone never tells the whole story without knowing what each win and loss was actually worth.
Any Swing Board row shows two target levels, each with its own Risk:Reward ratio (e.g. 1.5:1 and 3:1) - notice the further target always carries the better ratio, at the cost of being less likely to be reached.
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