Over the weekend I received an email with a question about Forex Nitty Gritty.
Basically, they wanted to know if this program looked at risk reward, and if so, what was it per trade. I thought this was a good question so decided to post my answer here so visitors to my blog could read the answer as well. Here we go…
Risk Reward is great with Forex Nitty Gritty for a variety of reasons.
In case you don’t know what risk/reward is… it is the amount of pips (money) you are risking on a trade compared to the amount of pips (money) you are hoping to gain. It is not recommended to risk a lot to gain a little. It just makes sense, you don’t want 1 losing trade to wipe out the winnings of many winning trades.
A lot of people like to talk about risk reward… but sometimes it is harder to figure out than you think. Let me explain…
If you pick a stop loss and ONE price target it is easy. Risking 30 pips to gain 30 pips (1:1), risking 30 pips to gain 60 (1:2), etc. This is pretty straight forward. (I like to look at trades that have at least 1:1.5 risk reward or higher… but that is just me).
In Forex Nitty Gritty, there are various ways risk is reduced even further. This is what makes this such an attractive program… especially for beginners. This Forex trading strategy not only looks to get into the market at low risk, high reward areas… but aims to get you into a NO RISK trade as soon as possible. But we will get into that in a minute.
First off, you pick TWO price targets for the Simple Trading Method. There is a bit of flexibility in the way you pick these targets (which is fully explained), so you can basically choose the risk reward you want to try for. For example, you first target could be a risk reward of 1:1 or 1:1.5, and your second could be at 1:2 or 1:3. This really depends on your risk tolerance… so you’ll have to experiment and figure out what is right for you.
Secondly, you move your stop loss up to break even as soon as possible. So, once you move your stop loss up… you have ZERO risk. Yes, sometimes the market turns around and stops you out… but for no loss. In my opinion, no loss is not a bad thing. You can always get back into the trade if the conditions are right.
Thirdly, you scale out of the trade by taking a portion of your profits at the first target and letting the second portion run to the second. Most professional traders trade this way. For me, it helps to see some profit on the trade as fast as possible. It just feels good and keeps the stress down.
Once you move your stop loss and take partial profits… you’ve already profited AND have ZERO risk to profit further. This happens a lot. Not only do you ALREADY have a winning trade under your belt, but you are in a second trade for a higher price target with absolutely NO RISK! It is a great feeling to be in a trade when you are already a winner and have nothing to lose!
The point is, the trade might start off at 1:1, 1:1.5 or 1:2… but the risk reward goes dramatically in your favor as you manage the trade. In my opinion, Forex Nitty Gritty has an excellent risk to reward ratio with a way to reduce risk even more as the trade progresses. I wouldn’t know how to figure out exactly what the risk-reward is per trade. But it starts off great and gets BETTER as the trade progresses!
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