How Bad Risk to Reward Improves Your Trading

[@Zolasebelebele6]

I have actually tested this on demo it worked like its the holygrail I passed my funding challenge with this,im now a funded trader Thank you Scott❤

[@scottwelshstrategies]

@@Zolasebelebele6 Excellent! It’s very important to me that my ideas test out for other traders. I’d love to know some more details on your success but it’s okay if you want to keep it private. Congratulations!

[@Zolasebelebele6]

@@scottwelshstrategies nop im not private Let me explain what i did On phase 1 i took 300 trades in less than 40days i know its alot but hear me out 😅 The account is 5kUSD prop which is kinda small but it's the best i can do living in Africa ,since salary is less than 100usd P/M here Anyway i managed to save up 39USD to buy a prop account The max drawdown is 500USD meaning im working with only 500USD 1% of 500 USD Is small so i was risking 50USD PER trade with RR4:1 to make 12USD Out of all 300TRADES i won 75% of the trades and i discovered your channel in may i was new to the concept of negative RR PHASE 2 i only took 3 weeks to pass I'm waiting for payout of 100USD which should come in 2days its not much but considering i only earn less than 100USD per month this feels like i got two jobs im excited,i deleted meta trader to avoid overtrading Thank you alot scott

[@Zolasebelebele6]

@@scottwelshstrategies thank you😭I appreciate it more than you could think of

[@IDraw99]

I recently switched to scalping and had a 55% winrate at 1:1. I switched to 2:1 and was at 80% winrate immediately but only during sharp trends. I've developed another strategy more suitable for the more common usual market conditions and at 3:1 I'm currently at 85% winrate. My confidence has never been higher, I have zero problems entering a trade now. And that's the main thing about trading, taking losses multiple times in a row can mess with your confidence and make you reluctant to enter very good setups. But having a 5,6,7,10 win streak removes that fear almost completely.

[@zamiadams4343]

Great video and absolutely right. I've made 11% this week by using all the leverage I can get and taking tiny wins £40 at a time, made over 30 trades with no losers, just tiny wins . Do the opposite of what the trading books tell you i.e. 1:2 RR etc as you won't earn money if you do that.

[@nasiegrifftalks]

Thanks for this I literally dumped a winning system a year and five mo ago because my RRs were quote on quote bad but I'd win almost everytime. Long story short, wasted that much time and getting back to my roots.

[@Woodward06]

I just had this realization last week. Its totally changed my views of the market.. I was always favoring 1:1 RR.. then trying 1:1.5.. couldnt get past 40% wins. I made a excel doc with r:r to win %. Its awesome that your results are exactly in line with expectations. A 5:1 R:R is expected to win 90% of the time... the next example, a 1:3 should win 25% of the time. I see why brokers love to promote 1:3 - 1:5 R's.. they get a 3:1 - 5:1 taking the trade! Great video. I ran random entries on XauUsd, EurUsd, BtcUsd from 2022. Once we make the spread negligible, the number fall in line perfectly.

[@Kloutkulture]

How you cant get 50% on a 1:1 😂. Thats less than random chance

[@IDraw99]

​@@Kloutkulture there's more context missing besides random chance... placing a 1:1 trade against a trend in theory is a 50/50 trade but in reality you're probably gonna lose a lot more than you win since you're going against the most probable next move, which is the continuation of a trend. So you maybe might win 30% of the time only due to pullbacks but you're going to hit your SL sooner than TP since the direction of trend is going closet to your SL than TP

[@felipe8511]

been testing this on live paper trading and it really changes everything i dont like trading multiple candles, instead i like trading the fibo retracement within a single higher time frame candle and keep the stop loss outside of its low/high range, the volatility on the market happens in between the previous candle's range in the lower frame before breaking out people using "positive" risk and reward are placing their stop losses inside the candle where the volatility is happening, that takes no effort for the big money to take them out of the trade

[@jeedub6142]

Just stumbling across your channel now and it's like a light opened for me... I'll explain... I've been researching to build my own automated trading bots (on fx markets) and have (a number of times) dabbled with the thought of a "negative" risk:reward as it seemed to ive bigger returns. However, because I kept seeing videos that told me that "only 'good' R:R are what you should do", I kept throwing away all those Strats that were, on the raw numbers, going to work. Seeing that someone else has also tackled this topic, and in such a methodical way, it's given me fresh energy to keep plugging away. Thank you for taking the time to make, and publish the video.. You got me as a subscriber

[@scottwelshstrategies]

Ha, I remember when I was in the same spot. I also thought it was "wrong" to have a small reward for a bigger risk. But there's nothing wrong with it. You just have to keep a close watch on the win % and make sure it doesn't drop too low for too long.

[@rachaelrb]

Best trading video ever! I even came back to watch again a year later lol

[@scottwelshstrategies]

Haha, great! I'd say you and your friends should watch it 400,000 more times and you'll be good!

[@chadolien]

wow! i love this.. everytime i aim for a 1:2 or higher i always lose more trades and it affects my psychology...now im using a 1.5: 1 and my equity curve is rising pretty nicely

[@scottwelshstrategies]

Beautiful! Great to hear!

[@daasassd271]

I genuinely believe that a lot of people are influenced by certain perspectives, making it challenging for them to comprehend the concept of negative risk-reward. I've observed that no matter how I automate a system with what is perceive as 'good' risk-reward, the market seems to find a way to bring my system to a break-even or a loss. Interestingly, the only approach that has shown some success for me is embracing a 'bad' risk-reward ratio. Thanks for sharing your analysis, it resonates with my experiences.

[@scottwelshstrategies]

Very interesting! And I've had the same experiences. Everyone loves a big win (with an inherent positive reward to risk). But I've had more success with bad reward to risk in real life.

[@monti242421]

I start trading 1:4 system, after 1 winning, I was trading 1:1 automatically, basically doubles my account in two months, after 1 loss i decide to to go for 1:4 or 1:5 loss all the money i gain, I dont know how i gained that much but now I know now 1:1 was the key for that growth.

[@JAFFER3657]

It is logically better too like for example if you risk your previous day's gain (Suppose $200 on an account started at $25k and current position is at $26k) as your risk for the day then even if that black swann event occours your risk is only that previous day's gain (-$200 which means you are down to $25,800). It just looks like any other business where customer frauds, hacking attempts, robberies, fires etc. may happen but people continue after the event because they have been earning for years one such loss can be mitigated by creating backups and using low risk on each trade. This is my view on this, I'd say use negative RR, if you see a bigger opportunity try to use better RR. Great Content.

[@scottwelshstrategies]

Excellent comment. Negative risk to reward is not a bad thing if used responsibly on a reliable system. The companies that run lotteries have a terrible risk to reward--the pay out millions for a $5 ticket! But they seem to make a profit...

[@Danno45GH]

Scott, you’re awesome. 👍🏼 Funny, wise and you just plain entertain while getting your points across. Thank you for being so engaging

[@scottwelshstrategies]

Ha! My pleasure!

[@Daniel-dz3ls]

Highly undervalued video(wich is a shame because i also agree with this information, simple math) this is exactly what i was looking for (funny too), thank you, peace.

[@scottwelshstrategies]

Thanks!

[@MusicaMexicanaShow]

Ive been Backtesting -5:1 RR and wow, my eyes are opened

[@ntokozo5668]

I tried reverse trading my signals, thinking the result would be positive, and the results were negative. After some time, I realised it was the RR that was affecting my result. 1:1 RR = 50%.... in other words, I 100% agree with this video. Thank you...

[@scottwelshstrategies]

It's weird how reversing a losing strategy doesn't work very often. It seems like it would! But negative r:r can really help in many ways.

[@rogersalllike9133]

when you use Bad Risk Reward ratio U use the market structure to save you from having losing trade When you use Good Risk Reward ratio u use the market structure to stop u from making this TP thats the reality Bad Risk Reward retio can save you just because thats the max TP you can get in that specific position So Risk Reward ratio is important sometimes to be adjusted based on every position look 😅 The promotors of the 1:3 Good RRR are traders that want you to fail because they know that you wont have the account size to manage those 10 losses in a row risking 3-5 % per trade of your account o

[@coletaylor9847]

I love the sarcasm

[@nifty.banknifty.options.future]

Good Risk to reward is being prepared to gain max when the market goes in your direction

[@MusicaMexicanaShow]

yes, but you will lose most of the time with big RR

[@itslike123]

@@MusicaMexicanaShow maybe he means scale in

[@MusicaMexicanaShow]

@@itslike123i see! And yes great idea 💡

[@mkscott12]

Nice, your win rate on the 3:1 was pretty horrible and at 3:1 would need a really bad strategy, however good theory, I use the 33 Signals Math based strategy and same theory, low RR but 92% win rate and makes a huge difference. Thanks for the vid.

[@macmert9446]

what do you mean by 33 Signals Math based strategy? can you explain that?

[@emobrawler2007]

I've backtested this on gold with my strategy for 1 year with 11:3 RR and it's on profit. Been using this for live trading for about 3 weeks now and it seems to be working perfectly for now. hope it continues for years.

[@scottwelshstrategies]

Awesome to hear. Thanks for sharing.

[@hesit7591]

What do you mean when you say 11:3?

[@scottwelshstrategies]

@@hesit7591 I assume that means stop is 11x ATR and target is 3x ATR.

[@emobrawler2007]

@@scottwelshstrategies correct!

[@MrWackydoodles]

Hey man, thanks for this vid, I'm 4 years late but I'm just curious if you still use this system up to now? Tanks man will appreciate your answer.

[@scottwelshstrategies]

Hello! I still do trade systems with "bad" risk to reward but not this particular system. In the U.S., unfortunately, the spreads and margin amounts have changed dramatically. Outside the U.S., this system is still viable. But the trading world in America made me stop trading it live.

[@Kevinschart]

a consistent win percentage, be it 40% or 75%, is the most important. if you can't win consistently risk:reward doesn't matter.

[@scottwelshstrategies]

For me, it's six in one, half-dozen the other. A 90% win rate that wins $1 and loses $10 is never going to work. And a 10% win rate that wins $10 and loses $1 will always work. Reward to risk and win rate have to work together for me to be comfortable.

[@Kevinschart]

@@scottwelshstrategies I completely agree. Neither variable alone will make you a winner. But establishing an R:R requires no work. Consistent winning is the elusive piece.

[@scottwelshstrategies]

@@Kevinschart Agreed!

[@MusicaMexicanaShow]

@@scottwelshstrategiesm doing the same exact thing, risking $10 to make $1 on a 10k prop challenge Whenever I lose $10 I open a recovery trade having a 90% chance of wining that trade, if that fails I’m only down 1% on the account Then I recover that loss in 2 separate trades of $50 tp and $500 stop loss at a 90% win rate For me it’s the best thing ever knowing you have probabilities in your favor Worst case scenario is losing a total of 6% which Can be recovered 1-2 weeks 👍🏼

[@piercarloscalamandre5204]

@@MusicaMexicanaShow Hi, wich kind of recovery? do you sell option with delta

[@Bxasd]

Bruh I swear to god I immediately became profitable after using a negative risk to reward ratio of 1:0.5 . I was struggling for 5 years until I realized that we can't really predict where price moves and instead we can take advantage of small movements. We have been convinced to use "good" risk to reward ratios because the brokers just want us to lose! This is a secret that nobody talks about.

[@komfyk]

Buffet is an investor, not a trader

[@banginzaza]

Excellent video brother

[@scottwelshstrategies]

Thanks!

[@dre6289]

Pretty much my first indicator if someone is a noob, is if they argue against this. People who worry about rr are using losing strategies.

[@scottwelshstrategies]

Ha, I kind of had the same idea. To argue against is a tell-tale sign.

[@dre6289]

@scottwelshstrategies I agree with pretty much everything you said in this. I myself just hit my first 2 months of profitability with a strategy that deploys negative risk reward. I've watched a couple of other lectures of yours. Your enthusiasm and passion are inspiring.

[@scottwelshstrategies]

@@dre6289 Thank you! Your enthusiastic comment is inspiring!

[@mojik2411]

Dude you are amazing and you save me

[@scottwelshstrategies]

Happy to help.

[@meltay1835]

hey mate, what's the risk per trade that you use for the bad and good risk reward respectively ??

[@scottwelshstrategies]

It depends on the system but I've seen good testing a 5:1 bad to good. Sometimes even higher.

[@kevinjohnson3521]

@@scottwelshstrategiesit makes sense, your SL allows the trade to play out instead of quickly taking you out!

[@piercarloscalamandre5204]

@@scottwelshstrategies great video! do you usually use risk 5 and reward 1? ty

[@scottwelshstrategies]

For "bad" I've used 0.4:1 and for "good" I've used 2 or 3:1.

[@scottwelshstrategies]

@@piercarloscalamandre5204 My favorite "bad" ratio right now is risk 5 to make 2 (or 0.4 t0 1).

[@hesit7591]

Scott i was wondering if you still making good results using this 5:1 negative RR? Thanks

[@scottwelshstrategies]

I'm currently trading futures robots with a 2.5:1 negative ration and it's been great. I'm also trading Fx robots with around 5:1 negative and it's also been going well. So, at least for now, still doing okay!

[@kevinjohnson3521]

@@scottwelshstrategiesany robots you can share?

[@NoNo-zf6tz]

​@scottwelshstrategies 7 months later....are these still positive 😮

[@scottwelshstrategies]

@@pensadorx4065 Sorry, I don't understand the question. But I have made several videos regarding negative reward to risk. Check those out and maybe try/test those systems.

[@tomhgriff1]

Although I agree overall all your strategies are on the stock market which have gone up non stop for 100 years. Yea there have been blips of a sell off which have lasted max 6 months. Do the same studies on a currency or a commodity and see

[@scottwelshstrategies]

I've studied it on futures and fx and the results are the same. "Bad" reward to risk can work on anything. Of course, the settings and ratios change from instrument to instrument but the philosophy works on any type of instrument.

[@fakhirfakhir9114]

new sub thanks for the gem!

[@scottwelshstrategies]

No, thank you!

[@nikoletterman6542]

Michael Scott, nice.

[@scottwelshstrategies]

The best leader of our generation.

[@kevinjohnson3521]

I have been noticing the SL needs to be higher, falls in line here for FOREX from what I have been seeing on backtests!

[@eddyoliveiram]

Accurate.

[@taWay21]

only can work with automated systems because this removes the emotionality of trading.

[@scottwelshstrategies]

Automated definitely helps.

[@azazaelmaher6468]

What strategy are you using for this?

[@scottwelshstrategies]

The Heron and Hornet were the strategies that use this risk to reward style.

[@azazaelmaher6468]

@@scottwelshstrategies I am just realising how old this video is. Could you tell me where can I learn the Heron/Hornet strategy, is this on your site?

[@scottwelshstrategies]

@@azazaelmaher6468 I don't trade this strategy anymore in the U.S., so I don't have any videos on it. If you look up Heron on my KZbin channel, I've done a lot of videos on it.

[@MusicaMexicanaShow]

@@scottwelshstrategies Are you still profitbale doing reverse RR? Or do you still use it?

[@shxttyfx]

its fact

[@nifty.banknifty.options.future]

Your trading system if just misleading for the beginers man, with this one day this trader will be wiped out when that big move day comes that hits his massive stop loss, honesty is still the best policy

[@scottwelshstrategies]

I've traded both "good" risk to reward and "bad" risk to reward. Honestly, they both work as long as a trader doesn't use too much risk.

[@dolmsted5976]

I heard you say OHIO. Freudian slip?

[@scottwelshstrategies]

You can't prove that!

[@rickdeckard1075]

you assumed a ranging market and took only longs.

[@scottwelshstrategies]

Keep in mind, I'm not trying to trick you in these videos. I'm trying to help. Yes, sometimes going Long only in the ES makes more mathematical sense than both. But I currently trade a robot that goes Long and Short with a "bad" reward to risk, so it's fine to trade both directions as long as the research shows it makes sense.

[@rickdeckard1075]

@@scottwelshstrategies ok, makes sense

[@yamkelanjikelana6261]

Lol SMB Capital

[@amyk.8434]

But at some point one unexpected huge loss can wipe out all those small gains.

[@scottwelshstrategies]

Kind of. If risk to reward gets too far out of control, you're exactly right. But if the ratio is just a little bit negative, it outperforms a "good" ratio by quite a bit on many systems. It doesn't seem like it should be true but that's what the numbers have shown me.

[@LucretiusEldritch]

Scott Welsh Trading Systems Agreed. What turned my trading around was negative RR with trailing stops. The most important thing is the profit factor, not the RR ratio.

[@Laurenwoodruff]

@@LucretiusEldritch How did you trail your stop if your RR was negative?

[@kevinjohnson3521]

@@LaurenwoodruffI assume he adjusts it of course after the trade starts

[@payafarhadbahman976]

I'm sorry, but the market beats you with high RR. It's been proven by experience.

[@scottwelshstrategies]

Not true, but okay!