R/R Ratio and day trading ordinary shares - Aussie Stock Forums

1. ## R/R Ratio and day trading ordinary shares

I've got a question in regards to risk reward ratio.
I can understand how the 3:1 ratio works in relation to leveraged instruments, but how is it possible to apply this ratio in day trading ordinary shares?
Forgetting about leverage (I cringe at the thought of owing my life to the CFD game) if I had 60K to day trade ordinary shares, how would the 3:1 ratio apply here?

Excuse the obviously stupid question, as I'm just a passive investor at the moment.

2. ## Re: R/R Ratio and day trading ordinary shares

as a simple example.

I bought GPT at \$1.57

after a turn around from a recent all time low of \$1.33.

I considered my risk to be 157-133 = 24c

I sold near an intra day high of \$2.24 (after a 4c div) so return was 228-157 = 71c...on a feeling it had hit a peek (was correct)

71/24 =2.96 R/R.

close enough to 3/1

glad I took my profit when I did!

technique often used between support and resistance levels, and pivot points.

I have used the same technique for intra-day, but my R/R was 1.5/1.

you would be need to be very fortunate/expert to trade intra-day succesfully at 3/1 (my experience only, I am a newbie to trading)

you would have many losing trades

3. ## Re: R/R Ratio and day trading ordinary shares

I figured it would be very hard to successfully trade intra-day on that ratio. A weekly time frame (or however long it takes!) was what I originally assumed to be more logical to get this level of reward.

4. ## Re: R/R Ratio and day trading ordinary shares

You can trade intraday or any timeframe for that matter with a 3:1 R/R.

You just have to find low risk set ups. If trading intraday you will tend to use lower timeframe charts - ie 5/10/15/30 min charts.

This should give you opportunities to get lower risk set ups.

Instead of using 25c risk and 75c target you might look for setups with 5c risk and a 15c target. You may also have to use a different universe of stocks for intraday trading as well - eg higher liquidity.

Obvioulsy with shorter timeframes and hold time it gets harder to achieve larger targets and you have more chance of being stopped out due to the closer stops. This is why true daytraders love volatility and wide intraday ranges.

If you are going to trade intraday it is very important to have strict rules for entry & exit and a system with positive expectantcy - this is actually true of all trading.

5. ## Re: R/R Ratio and day trading ordinary shares

i agree u can trade intra-day at 3/1.

but high risk for beginner.

my opinion, need to build experience with longer time frame and/or lower R/R first

u need live data, good software, low commissions, high ability to identify trade opportunities, constant monitor of position, (due to possibility of gapping stop loss, on small price move) and MUCH larger position size,

otherwise the chance of failure is too high.(for newer trader, which inquirer indicated they are, i think)

admit I could be wrong, different individuals have different methods and capabilities.

also at the moment R/R still favors short side trading overall IMO

welcome debate

6. ## Re: R/R Ratio and day trading ordinary shares

All trading is high risk for traders new to the game that have a limited understanding of what makes a profitable trader imo. The current market conditions make it even harder.

I was just answering how a 3:1 R/R could be achieved intraday. There is a range of other issues which need to be addressed before intraday trading (or trading in general) is undertaken, as you have touched on.

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