Understanding Risk-Reward in CFD Trading

Alright, let's talk risk-reward, because far too many CFD traders get this wrong. It’s not just about what you could make, but what you could lose versus what you expect to gain. If you're risking $100 to make $50, that's a 1:0.5 risk-reward, which is dogshit. You need to be looking for at least 1:1, but ideally 1:2 or better. Say you're eyeing $NG at 6.01. If your stop is at 5.90 (risking 11 cents) and your target is 6.23 (gaining 22 cents), that's a 1:2. Good. Even if you're only right 50% of the time, you're still profitable. Conversely, if you're chasing $USDCAD shorts from 1.40032 aiming for 1.39900 but your stop is at 1.40200, that's a terrible ratio. Your win rate needs to be through the roof to make that work consistently, and frankly, it rarely is. Don't be dumb. Quantify your maximum loss before you even think about your profit target. That's the first step to not blowing up your account.