Using risk to reward is one of the corner stones of trading, in my opinion, of course. However, most traders don’t understand it. Simplistically, it is profit gained divided by amount you were risking. The higher the reward, the lower your winning percentage needs to be in trading.
Using Risk to Reward To Your Trading Advantage
In this video, Gail Mercer, founder of TradersHelpDesk, is trading the 5 minute binary options using a 1 : 2. That means for every $1 your are risking there is a $2 gain. While faster trading is may not be for everyone, it can help you to develop your skills. Calculating profit factor, handling losses, understanding the correlation between winning percentages and profit factor are just a few of the skills that can be improved by pushing yourself harder on these faster timeframes. These types of trades can also help instill discipline and overcome emotions that you may struggle with later on.
In the video, Gail has both wins and losses yet remains positive because she is using risk to reward skewed in her favor. Regardless of what types of binary options you are trading, practice makes perfect and the more you can practice the better you can become.