POPULAR HIGH RISK-LOW REWARD STRATEGIES
There are basically 5 main types of High Risk-Low Reward Strategies, also called High R/R Ratio Strategies, I must point out that you need to know a little bit about 'Risk', 'Reward, and "Risk to Reward Ratios'.
***For those who have little or no idea what these terms mean, please visit my Risk, Reward, R/R Ratio & R-Multiples page first, before continuing, by *CLICKING HERE* (otherwise the information presented below will make very little sense!)
THE FIVE HIGH RISK/REWARD RATIO STRATEGIES
Strategy 1:
High R/R Ratio Short Term Scalping Trade: Normally a scalping strategy employed whereby the scalper goes for nearby profit targets with a far out stoplosses. E.g. entering with a profit target of 20 pips with a stoploss of 60 pips. In extreme cases, like a profit target of 30 pips and a stop at 300 pips, which is a Risk/Reward of 10:1, the winning percentage is normally very high. But it comes at a high price. It takes 10 trades to recover from a single loss. Very popular strategy use by many autotrading / robotic programmes to scalp the market, especially in Europe and the States. Works well in ranging markets but with utterly disasterous results in trending ones ! ( unless a Range-equalised Macroretic Structure (REMS) is adopted, as in our Proprietary IR3 Trading Methodology )
Strategy 2:
High R/R Ratio Intermediate Term Trade: Similar to (1) above but at a higher Time Frame. In the worst case scenario, it will approximate to a simple 'buy & hold' strategy. Buy and Hold strategies are inherently high risk-to-reward type 'trades'.
Strategy 3:
High R/R Ratio Short Options Trading (Naked Options & Credit Spreads): Option Credit spreads and naked options usually produce very high Risk/Reward Ratios, for the premium recieved in return.
Strategy 4:
High R/R Ratio Price Averaging Trade: Averaging down or up in the market will result in a progressive higher Risk/Reward Ratio. Works well in oscillatory markets but poorly in markets that are moving adversely.
Strategy 5:
High R/R Ratio Martingale Type Trade: Doubling up after each loss will result in a progressive higher Risk/Reward Ratio. ( Note that it need not be a factor of 2, as in the case of doubling. As long as the bet size increases with each losing outcome, that will suffice to qualify as 'martingale'. There are 'slower' variations of the martingale like the D'Alembert Up & Down Counting Method, as well as Breakeven Method, but are essentially incremental when experiencing loss.) )
***PLEASE NOTE THAT R/R RATIOS MAY ALSO BE DEFINED OR USED IN REVERSE WHICH MAY CAUSE CONFUSION. IT MAY BE WRITTEN AS REWARD TO RISK INSTEAD OF RISK TO REWARD.