This week I had a pretty enlightening conversation on this topic, with a trader who says he often opens trades with a 1:1 risk/reward ratio—or even lower.
The first thing everyone thinks is: this guy’s crazy. A risk/reward under 1:2 is never worth it.
And yet—if 90% of traders lose money, doesn’t it make sense to think outside the box?
His trading style is practically impossible to replicate, but that’s not the point. What did open my eyes is that I started backtesting my losing longs, adjusting the R/R to 1, and what I discovered was pretty shocking.
Most of my profits come from the short side. I’ve always struggled trading in bullish conditions—my longs have too low a win rate. I can keep shorting with an R/R of 1:3, 1:4 or more and stay profitable. But not with longs. Longs are always a struggle.
Yet, it clearly emerged that Win Rate and Risk/Return are inversely proportional.
Without changing my strategy, just by adjusting the risk/reward, the majority of my losing longs would actually be winners if they had a lower than 2:1 R/R—and a wider stop loss.
I would’ve basically avoided all those wicks that hit your stop-loss before bouncing back and going into profit—after stopping you out.
Honestly, this is something eye-opening I had never truly considered.
Theoretically, if you have a win rate over 50%, you can take trades with a 1:1 R/R and still be profitable.
Why does nobody talk about this?
Especially in a market like crypto, where volatility is extremely high—why does no one consider this approach?
Honestly, I’m enlightened by all of this. And after doing some backtesting, at least on the long side, this would massively fix my problem with longs and significantly increase my win rate.
Let me finish by telling you that this newsletter will become paid soon. The price will obviously be low and symbolic. Maybe I’ll finally be able to buy myself a new bike.
I no longer feel free to share what I really think about the markets, and I absolutely don’t feel like dealing with negative comments. I’ve barely ever shilled a CEX reflink or exploited my presence like I could have. Those who really want to read what I think will still do so. Those who don’t—or those who love to throw insults—surely won’t subscribe. Even better. Maybe this will be an incentive to keep writing consistently, because believe me, writing is work and if I can pay for a new bike or my vacations by writing, I’ll do it.