How does this Trading Strategy has more than 70% win rate?
Is this the most consistent trading strategy?
Let's find out.
When I tested different Trading Strategies 100 times on the Trading Rush Channel, the
highest win rate we saw a strategy get was approximately 63 percent.
Strategy was the MACD strategy, and the rules were pretty simple.
Trade with the trend, and take more profit than the potential risk.
The MACD strategy followed a 1.5 to 1 reward risk ratio rule, and because of that, the
MACD strategy made a very good amount of profit.
Now many traders recommend trading with the trend and following a strict reward risk ratio
that is higher than 1.
In fact, I have tested all trading strategies on this channel with this strict rule.
But you know what?
let's break the rules.
It's time we test the trading strategy with a horrible reward risk ratio, and see what
actually happens if we don't take more profit than the risk.
What if all this time, you were trading with the wrong reward risk ratio.
Before that, you should watch the Beep Boop strategy video on the Trading Rush Channel.
In that video, and the AI trade video before that, I created a custom trading indicator.
This video is heavily based on what I talked about in that Beep Boop Video, so watch it
as well.
And subscribe to Trading Rush Channel, to see more trading videos and indicators tested
100 times.
After all, you don't want to put your money on an indicator that doesn't even work.
The Beep Boop indicator had a win rate of approximately 48 percent, and even though
48 sounds like a bad win rate in trading, it's actually not.
Because the 48 percent win rate was achieved with a 1.5 to 1 reward risk ratio.
And if you do the math, that's a good profit.
In the Trading Rush app, the beep boop indicator made a profit of 2000, and the profit graph
was also a lot better than many other trading strategies I have tested on this channel.
In this video, we are keeping the trend following rule, but we will break the reward risk ratio
rule.
We will take the entry signals the same way we took in the last video, but instead of
taking a 1.5 times more profit than the risk, we will take 0.5 times more profit than the
potential risk.
That's right, we will take less profit than the potential risk, half to be exact.
So what do you think will happen?
If we break the rules, will we lose money?
Watch this.
I tested the Beep Boop Trading strategy 100 times with a 0.5 to 1 reward risk ratio, and
here's what happened.
First of all, let's get a few things straight.
When you take more profit than risk, you are creating a chance of making more profit, than
what you might lose if the trade doesn't go in your favor.
So in case you lose one trade, and then make a profit in the next trade, your total profit
will be positive, because your second trade covered the loss of the previous trade, and
still had some money left over.
Now that's kind of obvious.
But when you use a reward risk ratio higher than 1, lets say 2 to 1, you are actually
decreasing your chances of making a profit, because then price has to move twice the distance
to reach your profit target, than it has to move to reach your stop loss, and price doesn't
do that every time.
So why does everyone recommend using a higher reward to risk ratio?
Well, the answer is pretty easy.
Even though price doesn't magically move in your favor every time you take a high reward
risk ratio trade, there is one kind of market, where price has a higher chance of moving
in your favor even if you have a high reward risk ratio.
Is during the trending market.
Now let's say you are completely new to trading.
Let's say you randomly take new trades in the market with a reward risk ratio lower
than 1.
You don't have any trading strategy, so when you randomly take trades when the market is
moving sideways, you sometimes make a loss because the price goes in the opposite direction,
and you make a profit when the price does move in your entry direction.
But since profit is always less than your loss, you will have a high chance of making
a loss in the long run.
In this scenario, where you randomly took trades, because you are new and don't have
a profitable strategy, you win most of the trades when the market was moving sideways,
and win less trades when price was moving in one direction.
Now lets say, you take more profit than your risk, lets say 2 to 1.
Now if the random trades don't go in your favor, you will lose less money than what
you will make when the price does go in your favor.
In this scenario, you lose most of the trades during the range market, because the price
couldn't reach your bigger profit target.
In the trending market, you win almost same number of random trades as you did with a
lower reward risk ratio, but this time, because you were booking double profits, the random
trades that were in the direction of the trend, made a lot more profit than the same trades
achieved last time with the lower reward risk ratio.
If you calculate the total profit of these two scenarios, you will see that the second
scenario where reward risk ratio was higher than one, made a profit.
Obviously, taking random trades is probably not going to make you a profit in the long
run even with a high reward risk ratio.
But what a good reward risk ratio can do is stop you from blowing up your account quickly
even if you take random trades.
And if you use a profitable trading strategy in a trending market, and have enough experience
to identify and avoid the sideways market, you can make more money with a higher reward
risk ratio.
But hold on a minute, what if you are a beginner and can't always detect a range market easily.
What do you do then?
According to the theory we discussed in these two scenarios, trade with a lower reward risk
ratio has a higher chance of making money in the sideways market.
and the only reason it didn't make money was because the random trading strategy was not
taking the trend direction into consideration.
So what if?
What if we create a trading strategy, that will follow the trend direction, and will
have a lower reward risk ratio like 0.5 to 1, so it will also have a higher chance of
making money in the range market.
So that's what I did.
Since I already created a profitable trend trading strategy in the beep boop indicator
video, I tested the same strategy 100 times with a 0.5 to 1 reward risk ratio.
And in the end, it got the highest win rate we have gotten on the Trading Rush Channel
ever.
In the Trading Rush App, it got a win rate of approximately 71 percent.
Now obviously the high win rate is because the win rate goes up if the reward risk ratio
goes down.
Look at the profit graph and the number of winners and losers.
In the Trading Rush App, the Beep Boop trading strategy made a small profit.
The account size was 10000, and it made a profit of less than 10 percent.
That's less than 10 percent profit gain, which is pretty bad.
If we compare it with the previous results we got in the last beep boop video with a
1.5 to 1 reward risk ratio.
The new Beep Boop Trading Strategy gained another 20 percent plus win rate, but couldn't
even make half of the profit it made last time.
This time, the strategy only gave 3 losers in a row, and gave 14 winners in a row.
Even though we took less profit than the risk, the end result with the beep boop trading
strategy was profitable, but not good enough like the result we got with the 1.5 to 1 reward
risk ratio.
Now remember, I created the Beep Boop indicator to follow the strong trends.
Furthermore, the beep boop indicator gives multiple good entry signals in a single trend.
These rules played an important role during the backtest, because most trades that were
lost last time at the extreme end of the trends, and during the weak range market, were won
this time.
So if you reduce the reward risk ratio on some other indicator that doesn't follow the
trend direction like the beep boop indicator does, you can have different or bad results.
With a 1.5 to 1 reward risk ratio, a lot of you are getting win rates more than 60 percent
and up to 80 percent with the beep boop strategy by only taking beep boop entry signals in
a trend.
Keep it up!
If you want to learn more about the beep boop trading strategy, and if you want to get the
beep boop indicator for free, check out the previous beep boop indicator video.
That's all.
Like the video if you liked it.
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videos and indicators tested 100 times.
After all, you don't want to put your money on an indicator that doesn't even work.
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