Asymmetric Trading | Forex Copier Blog





Author: Shams ul Zoha

Asymmetric Trading


In the financial industry, you may have heard about swing, position, day trading, etc. However, there is another class in which we classify the big tree that is called Asymmetric trading. It has two types:

  • Positive asymmetric trading where the risk-reward ratio is 1:10 in your favor.

  • Negative asymmetric trading where the risk-reward ratio is 10:1 in your deficit.

As a trader, you would probably be interested in high Return On Investment (ROI). Our article will cover the chances of making $10,000 or $5,000 out of $1,000 over a certain period through asymmetric risk reward opportunities.

Why should you look out for asymmetric trades?

The answer to this question is simple. As trading can be pretty hard, especially in the early stages, a few big winners can save your portfolio from potential margin calls. An excellent winning rate accompanied by a high-profit factor will demonstrate that you are a consistently profitable trader.

Profit factor Win ratio
0.5 70%
1 50%
1.5 40%
2 33.3%
3 25%
5 18%
10 10%

Table 1: Asymmetric trading with a profit factor of 10 requires you to win only a single execution out of 10.

The famous billionaire and investor Warren Buffet quotes that he does not need to win each trade; instead, a few significant gains will wipe out all the losses and provide sufficient returns.

Asymmetric Trading through Currency Charts

The forex market presents many opportunities for traders to capitalize on better risk-reward ratios. Fundamental and technical investors can use the swing, day, and scalping approaches to find the best setups according to their strategy. Read the sentiment and understand catalysts by institutions that create asymmetric trades.

Swing trade by a price action trader uses the weekly key level, marked in black, as potential support for his setup alongside the market trend.

Image 1: Swing trade by a price action trader uses the weekly key level, marked in black, as potential support for his setup alongside the market trend. His next target is the daily key level, which gives him a risk-reward ratio of 6.55, close to the asymmetric plan.

Here we have a scalper with exponential moving averages, stochastic RSI, and candlestick patterns in his trading arsenals.

Image 2: Here we have a scalper with exponential moving averages, stochastic RSI, and candlestick patterns in his trading arsenals. Receiving confirmations from all three, he jumps in a trade with R:R of 7.85. He gets out when he spots a bullish pin bar at the bottom.

Traders who use economics, news, and forecasts in their analysis can also get in on trades when they believe the GDP, NFP, interest rates, Consumer Price Index (CPI), etc., all point towards a significant up or down trend.

Other Best Options for Asymmetric Trading

Forex trading with a better profit factor is one way of looking at asymmetric trading. The following opportunities can also help traders to get the most delicate asymmetric chances in the financial markets:

  • Prop firms. Sign up for challenges at online prop firms. You can trade up to a million dollars with a single highly asymmetric investment of $200. This is how it works: A trader signs up for their challenge, shows that he is profitable, gets funded, and scales up his capital over months. Even a 10% return on a million-dollar equals $100,000, so our R:R here is far greater than 1:10.

  • Use trade copiers. Mirror trading software can help you copy trades from one account to another with modifications. As a good trader, managing funds of different investors is extremely easy by using auto trade copiers.

  • Mutual and hedge funds. This type of asymmetric trading can be considered as a slow investment considering most funds average only 10% return a year. An initial investment of $100,000 will take 10 years or so for a 100% return and 5 years for a 50%.

Crash of 1987

The famous crash of 1987 in which the Dow Jones lost 23% of its value gave traders massive losses on the long side. However, one trader called Paul Tudor Jones, who had successfully predicted the happening, made nearly $100 million. The trade made him famous worldwide as a top market player and earned him a reputation amongst notable financial institutions.

Limits to Asymmetric Trading

It is only possible to achieve a high risk-reward when you follow proper risk management, psychology, and strategy. Some strategies may not allow a trader to benefit from such scenarios, e.g., using expert advisors, indicators, etc. The price may move to the up or the downside frequently before moving towards the bigger target. Expecting the market to hit your take profit directly is a novice investor's way of thinking.

About Forex Copier

Forex Copier is an automated software that helps you copy your trades on the same or different PCs. It has two versions:

  • Forex Copier remote 2 for copying trades remotely from one MetaTrader® platform to another.

  • Forex Copier 3 copies trade between MetaTrader® platforms on similar PCs..

The copy trading software has many valuable features, including lot/risk management, price adjustments, order filtering, tweaking SL/TP, and emergency stops to help you get an easy edge in the industry. It is possible to diversify your trading accounts and brokers by distributing your equity over several portfolios and using the auto trade copier to copy positions from one account to all of the others. You can also choose to sell subscriptions to your signals and EAs to investors worldwide, with or without access to their login credentials.

The scope here is unlimited, as the Forex Copier can help gurus in teaching by sharing their executions. For traders on a losing streak, the mirror trading software offers a reverse mode that turns all incoming buys into sales and vice versa with modifications of the exit and entry points.