(Frequency of Winning x Average Size of Win) - (Frequency of Losing x Average Size of Loser) = Risk
(.40 x 3) - (.60 x 1) = (1.2 - .6) = .6 Risk Unit...Trading is about math and risk management...The gist of the model is that you must keep your losses small and let your winners run. Indeed, many successful traders target a 3:1 or 4:1 relationship between winning...