What is one of the most important trading and investing features you must focus on?
Some may say it is profitability.It is correct.Some may say it is winning.Also correct.But there is also another feature often neglected.It is a statistical ratio and although statistics do not tell always the whole truth this ratio does all the time.
The statistical ratio we refer to is the win to loss ratio.It does not matter what is the winning ratio.It would be great to have a 100% win ratio but it is not a logical one.What is important is a ratio that will help consistency and profitability over time.There is a very simple rule.Win more than you lose each time to grow your trading account and capital.
With that said a minimum 1:1 risk reward ratio should be the minimum one to consider placing any trade.The higher risk/reward ratio the better and there is no golden rule what is the best ratio.But we mainly like a 1:2 risk/reward ratio meaning you risk for example $500 to win $1000.With this ratio you can be profitable even if you lose almost 55 to 60 percent of your trades.
Having in mind that trading often does not mean profitability always then a focus on quality and well researched trades is vital.Should you skip a trade with a risk/reward less than 1/2?Not always.It depends on your trading style and risk aversion.But the ultimate trading goal should be to stay as an investor in the financial markets for many years to come.A good risk reward ratio will help a lot on this.To make money over time.