Very good evening guys, Berlin this side Welcome back to another learning video from TradeLikeBerlin Very welcome to you all to another learning session from TradeLikeBerlin what you will gonna learn in this session is written in front of you That what you are going to learn you are going to learn risk to reward management That is RR management plus the probability game 9 of the 10 people would have explained this term to you in trading focus on risk to reward, focus on risk management, okay, but rarely any of them have actually explained you by playing it. Things I am going to explain to you in this session, I will cover this entire topic in two parts, first theory, second practical, whatever points I am going explain to you in this session, in the theory part, I will show it by implementing it as it is in the live market so that you understand that if you if you follow this thing, then what is the outcome you are going to get, okay to all the viewers over there who are new and those who are old, very welcome to the learning session of trade like Berlin let's begin with the session guys all the people who are new don't worry I am not going to bore you much we will finish this session within 15 minutes okay .Let's start. the first thing is written down here is RR management now before understanding RR management I will tell you go to Youtube and in the search bar, search Trading Strategies When you will search Trading Strategies then you will get many trading video where it will be written bla bla bla strategy with accuracy of 90% bla bla bla strategy with accuracy of 95% bla bla bla strategy with accuracy of 99% now I am not questioning these strategies not doubting them you must have such strategy but why is it that despite having 90% accurate strategy they are still losing money why is it the answer is very simple they don't have the relationship reward management got it I am telling you a code here which you have to note down and paste it on your trading disk it's very important. The quote says, "WHAT MATTERS IS HOW MUCH MONEY YOU ARE MAKING WHEN YOU ARE RIGHT AND HOW MUCH MONEY "YOU ARE LOSING WHEN YOU ARE WRONG." I am repeating it once again, "What matters is how much money you are making when you are right and how much money you are losing when you are wrong" When you are right with your view how much money are you making and when you are wrong how much money are you losing. This matters okay, analysis you can predict crashes, predict anything this thing does not matter what matters is that when you are right with the analysis how much money are you making and when you are wrong when your view is going wrong how much money are you losing let us understand this with an example so that people who are new in trading can understand it okay not everyone is a not pro. Not everyone has spent much time in trading so there will be some people who are new. For them I will take a small example of RR management okay a small example of risk to reward management. Two traders, understand carefully one is named A and the other is named B. Both of them have 10 trades each. after 10 Trade accuracy rate of A is 90% and the other one has an accuracy rate of 60%. Now what happens is that if you look number wise, this one should be the winner, right? But what happens is that after 10, the person with 90 accuracy is still in loss and the person with 60% win rate is still in profit. Why it's like that The answer is "Risk to Reward Management" win rate does not matter. how accurate your strategy doesn't matter if the win rate of the strategy is 60%, you can still be a winner. You know how. Let me show you, when a person is executing 10 trades, then out of 10, in the trades where he wins, in the first trade he win. He made 1000 in that the second one he won also made 1000, which means he won nine trades continuously made 1000 in every trade and he made loss in last trade in the 10th trade, how much did he lose Rs.10000 what was the outcome it came out to be minus 1000. Okay, right. When his view was right 9 times then every time he made Rs.1000 and it became 9000. When he suffered a loss for the 10th time, he directly suffered a loss of 10000. So what was the outcome - 1000. Now in this, what did this guy with 60% accuracy do, that when he is winning, he is winning the same profit, Rs.1000 Rs.1000,Rs.1000,Rs.1000,Rs.1000, and so on he hit the target six times so how many did he make? 6000. Okay, now in the four times he has suffered loss, in all of them, he has suffered loss every time, only Rs.500 then 500*4 total Rs.2000 What the net came out to be +4000Rs. the only difference between a winner and a loser is how much money you are making when you are right and how much money you are losing when you are wrong if you have data about this thing if you have an estimate that when I am right with my view how much am I able to make and when I am going wrong then how much am I losing then you will understand where mistakes are happening if you have a strategy which has a win rate of 90 and your risk reward management is in this way then you will lose 100% and if you have a strategy which has only a win rate of 60% and risk to reward look something like this by the day end you will be in profit okay. lets see a bit what is a suitable RR what RR you should follow. Okay, risk to reward is the first thing that comes if you are doing basic then 1:1. I will never recommend that you go for 1:1. Okay, start with at least 1:2. What will happen in 1:2 is that the winners will be able to pay your losses. Okay, here the winner is paying the loss, so you are coming to zero. Here the winners are also paying the loss, even then you are profitable. I will Explain it a little briefly, like let's say in the first trade you hit the target or hit the SL. Okay, so how much did you lose? 1000Rs. okay In the second trade when you hit the target, you made +2000. The net came out to be +1000. You need to understand that I have to maintain RR in such a way that my losses, my winner trades, can pay my losses. Okay, which is a suitable risk to reward, which is a very good healthy risk to reward, that is 1:3 - 1:5 1:3 means when you are losing you are losing ₹ 10 when you are earning you are earning ₹ 30 okay it is clear when you are losing you are losing ₹ 10 when you are earning you are earning 50 okay let's take this with a good example let's understand you have a strategy like here the name of the strategy is Fibonacci the strategy is of Fibonacci The market is in good uptrend You are waiting for a setup to form the market has come to the golden zone of fibonacci you follow only one strategy that is fibonacci now how many trades do you have let's assume you have 10 trades okay in 10 trades you are following risk to reward ratio of 1:5 okay. You are following the risk to reward ratio of 1:5 now you look at the win rate here now let's assume that the win your win rate is only 50% only, right? So look at the outcome. You executed the first trade. So what happened? Let's assume that your SL was hit. How much did you lose in the SL hit? -1000. okay, that was the first trade. Now you take the second trade. In that also lets assume you hit SL. Your loss in the second trade was also -1000. Okay, you continue to take five trades. The outcome is the same in five trades. What happened? What comes out to be a net loss of 5000. Okay, here you have to see that I have taken five trades and even with such a good setup, I am taking a very worst case scenario. Okay, I am taking a very worst case scenario. Now understand this thing that the setup of fibonacci will be successful five times out of 10. It will be easily successful five to six times if your luck is good, then it will happen 7-8 times also. But here I am taking the worst case scenario where the setup of fibonacci. It is failing six times. Let's add one more time here. I have made it six times here. Okay, now you have failed six times. What is your net loss? The net loss comes out to be -6000. You made a net loss of 6000 when you were SL hit six times. Okay, now in the next four times, out of your winning trades, how many trades are left? Here, six trades are over. What is left with you are four trades. Now in these four trades, you can understand that one trade has become break even. There are three trades in which your target has been hit. Okay, when you are hitting the target, how much are you making? What is your reward ratio? It is five. That means when you are losing, you are losing 1000. When you are earning, you are earning 5000. Okay, so what has come here? 5000 * 3. I have made one trade break even, that is, you have done cost to cost. Okay, now look at this thing, 5 * 3 how many. It became 15000 and when you made losses in six trades, how much did you lose -6000Rs. What net came out to be +9000Rs. still in profit You are still in profit of +9000 For you it's very important to understand that if you are trading then you cannot do risk to reward of 1:1 you are losing 10 then earing 10 then losing 10 earing 10 and so on. You can not do this you at least need to focus on 1:3 focus on cutting the losses, focus on cutting the losses, people ask me about the rules, okay, There are two great traders, one of them is named, there are two great traders, I will tell you the names of both, okay, both name and their quotes just a second, okay so the first guy's name is Ed Seykota, now these traders say only one thing, okay, "I have three trading rules, keep cutting the losses, keep cutting the losses, keep Cutting the losses" got it here you have to focus on one thing that how can you cut the losses you are getting hit SL let it go you have to maintain 1:3. SL SL SL keep cutting the losses you know one thing if you tell even tell a monkey to trade if you tell him to focus only on call and put just put his hand in any of call or put and you execute that thing then you will win four times out of 10 is it possible that you toss a coin 10 times and out of 10 times head comes up not possible na. So you have a brain you are following such a thing which is proven very much proven that is fibonacci okay you are following such a strategy which is very much proven so what has to happen there in the end if you are maintaining a healthy risk to reward then for sure you will be profitable that is it for risk to Reward management we will follow the risk to rewards will be either 1:3 or 1:5 in the practical sessions, okay, you have to keep in mind the two quotes that I have mentioned, please note it down and paste that thing on your trading desk , the first one is that "what matters is how much money you are making when you are right and how much money you are losing when you are wrong " that's the first code the second quote is "keep cutting the losses keep cutting the losses and keep cutting the losses" got it. The way I am telling you, if you follow that I can say for sure you you will be in profit for sure okay I will be implementing the same things the things that I am telling, I will implement the same thing and then see what is the outcome, okay now let's go about the probability game the second part that was written what was written the second part that was written probability game now if I tell you one thing here how many minutes has the video been and it is 13 minutes i have to finish it in three-four minutes, is it taking too much, right? Are you getting bored? I Believe you are not getting bored, because I am only explaining to you the major points, the important points, let us understand the probability game, okay, you understand one thing that I give you such a way where by just looking at the chart, you will not need any strategy neither you will need support and resistance, nor you will find fibonacci, okay, and neither you will need demand and supply, you will not need any strategy, you will not need anything, if I tell you such a way where two things will work, one I taught you, the risk to reward management , the second is probability game, okay, now you assume you are such a person who even don't know how to read the chart, okay, so remove these things, you do not have knowledge of any of these things, you do not have to do anything, focus on only one thing, you must know numbers, you must know maths between 1 to 100, which You must be knowing the numbers 1 2 3 4 5 6 7 8 9 10 11 12 You must be knowing this, so all the options you are trading between 1 to 100, let's assume there is an option whose value is ₹20, okay, if the option of ₹20 is going to ₹40, then what is the probability that the option will go from 40 to 80, a little bit a little bit difficult it means you will not understand it in one go, you listen to it twice, listen to this thing thrice, you will understand repeating it again, if the option of 20 goes to 40, let's assume the Nifty 20000 CE, okay, if the CE of 20000 goes from 20 to 40, it in the day of expiry, okay, it goes from 20 to 40, then what is the probability that it goes from 40 to 80, like on the day of expiry, it happens that. Not every time it happens that it goes from ₹20 to 40 then come back to 0. After going from 20 to 40 it would come back to zero. There is a probability that this is happening three times out of 10 or four times that it is going from 20 to 40 and then it is going to 80. It is also going from 80 to 100. So here is the real game. What do you have to do on the day of expiry because I am going to apply this method. It is possible that I apply this method in the live session. You do not have to do anything on the day of expiry. You do not have to see the chart or do anything. You only have to look at the options. You have to look for the option of 20. You have to put an entry price at 40. look at that option which is trading at 20 and you have to buy it at 40 how much will the buying? How much will the buying? buying will be at 40. What will be the stop loss? 30. What will be your target? 80Rs. Now you have to implement this with your eyes closed. How many times 10 10 times you have to implement it with your eyes closed. you don't have to do anything. 10 times out of 10 when SL hits. Keep cutting the loss. You can trade with one lot. Loss of one lot is not that big. Let's assume that whatever is the lot side of Nifty, if you are making a loss of 10 points in it, then I don't think that it will be a big loss. You don't do anything. Track the option of 20Rs. As soon as it goes to 40 buy it ,and put SL on it 10Rs.. SL will be at 30 and whatever the target is, it will +40Rs. you will see that when you execute in 10 times, either you will be at break even or you will be at profit. You have to understand this thing that when the 20Rs. Option is going to 40, okay, then how many times is it going to 80, let's assume that this happens in 10 times. It happens only four times. Okay, it happens four times. You must know the expiry game here two rupee options goes to 100Rs. I am talking about an option of 20Rs. if option of 20 goes to 40, my target will be 80 and our SL will be, 30. Here, neither charts are being used nor anything else is being set, it is just a game of numbers. Now, you understand what you are expecting, that four times, if you are winning four times, you are losing six times. So, if you are winning, how much are you getting plus 40, when you are losing, how much are you losing? -10 What comes out to be risk to reward 1:4 now, you understand that when you made losses six times, how much did you lose? Suppose, if you are executing 100 quantity you lost 6000. Now, when you have targeted the trade four times, then how much are you winning? Then how much money are you earning? Just think. You have to understand the probability and the risk to reward game. I have explained it to you. I have explained the probability, even if you don't follow the example I just showed I will be implementing the example live in front of you, then you will understand how things works I am believing that you have understood what I am trying to focus you on here, people just keep on repeating the same thing to you, understand risk to reward management, understand risk to reward management, understanding risk to reward system is a good thing but you must understand how you have to play it now here I have faced losses, How much? We have 100 quantity and the SL got hit six times. That it means 100 quantity, okay, in 100 quantity, there was a loss of 10 points in a trade of Rs. 1000, I incurred losses six times, so my loss came out to be 6000 and 100 quantity into 40 points, that This is 4000 net how much did it come out 16 000. Deduct 6000 from 16000 your net profit of 10000 will remain after 10 rate we will implement all these things live and see the quantity here are very less I will execute more quantity in live okay then we will meet with the outcome what is going to happen I can tell you this much that if you follow the things that I am telling you then all the traders who are sitting on youtube or who are teaching you , you will be more profitable then them that's all for this videos guys I believe that you have understood something do let me know in the comment section if you have found something confusing I will try to brief this more in next practical session that's all for now see you all in the next session just want to say, strict with TradeLikeBerlin and together we have to go to a long way those who are new, if you want you can subscribe to the channel and please be alert of the fake telegram channel with the name of TradeLikeBerlin. TradeLikeBerlin do not run any kind of services. 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