# Do Not Be Fooled by Ratios

## Avoid Being Fooled By Ratios

Trading involves a lot of complex calculations and we are often following the rule of Ratios whenever we make trades. A major example of this is the risk/reward ratio. This is where you will only make trades that have the minimal risk, but promises a great reward.

Although this has been used for quite some time now by many different traders, it is important that you know to never really trust ratios in the first place.

Here is why: suppose that there are two trades. One promises to give you 5 with a risk factor of only 1. The other trade is a measly 1 paid profit in exchange for a possible 5 risk factor. Of the two trades, which would people choose? It would be obvious, at least on the surface, that people would choose the one with the lower risk factor, but that choice is actually wrong. Let me explain why.

The problem with people who rely solely on ratios is that they do not look at the actual probability or chance that they’re going to win in the first place. Yes, you might get paid 5 times and the risk of losing is only 1, but what if the actual percentage is 10%? The odds are not in your favor, my friend.

And truth be told, the actual chance that you’re going to win a trade in real life is close to that percentage; around 10-15%.

So you see now that ratios do not necessarily mean that you’re going to win trades. It just means that your potential for loss is not that big and so you can safely trade.