--- title: 'The Truth About Negative Risk-Reward in Day Trading - They Lied to You' source: 'https://youtube.com/watch?v=M22DMQQr5gE' video_id: 'M22DMQQr5gE' date: 2026-08-04 duration_sec: 1338 --- # The Truth About Negative Risk-Reward in Day Trading - They Lied to You > Source: [The Truth About Negative Risk-Reward in Day Trading - They Lied to You](https://youtube.com/watch?v=M22DMQQr5gE) ## Summary The video challenges the conventional wisdom that traders must use a positive risk-reward ratio (target larger than stop loss). The presenter, Pio, argues that a negative risk-reward ratio (target smaller than stop loss) can be effective if combined with a high win rate, a well-structured strategy, and rigorous risk management. He shares his personal experience of using this approach for nearly a decade and provides two live chart examples to illustrate his points. ### Key Points - **Conventional teaching vs. reality** [00:03] — A teacher claimed that trading with a negative risk-reward ratio is wrong because the numbers don't add up. The presenter learned a strategy with a target three times larger than the stop loss, but experienced multiple consecutive losses, leading to doubt. - **Questioning the norm** [01:57] — The presenter wonders if reversing the risk-reward ratio (using a larger stop loss and smaller target) could work, noting that it might lead to more wins and faster profit, despite being considered 'wrong'. - **Personal experience with negative risk-reward** [02:26] — Pio reveals he has traded with a negative risk-reward ratio for almost 10 years, with targets two or three times smaller than the stop loss, and it works in his real account and proprietary trading tests. - **The hidden downside of positive risk-reward** [03:22] — While positive risk-reward makes mathematical sense, it leads to an extremely low success rate and many stop-loss orders before hitting a target, which can break traders emotionally. - **Why negative risk-reward works** [05:07] — With a target closer to the stop loss, the price is more likely to hit the target first, leading to a higher win rate. However, it requires a high win rate to be profitable: at least 67% for a 1:2 risk-reward and 75% for a 1:3. - **Emotional benefits** [07:30] — Having more wins than losses boosts confidence and emotional control, making it easier to handle occasional stop losses. - **Risk management rules** [08:10] — Pio uses daily goals and loss limits: for a 1:2 risk-reward, daily goal is two wins and loss limit is one stop loss; for 1:3, daily goal is three wins and loss limit is one stop loss. This ensures he never loses more than he can win in a day. - **Setup 1: Target twice as small as stop loss** [08:52] — A strategy using the 15-minute and 1-minute timeframes with Donchian channel and P Trader coloring. Presented on April 12th, it achieved a 100% success rate over four days, with a risk-reward of 1:1.171 (target 175 points, stop 300 points). - **Setup 2: Stop loss three times larger than target** [13:36] — A strategy using a custom buy/sell indicator and moving averages (17, 72, 144). In April 2026, it had a 93.3% success rate (28 wins, 2 losses), well above the 75% breakeven. - **Honest caveats** [18:29] — Even with negative risk-reward, there will be losing streaks. Strategies can stop working as market conditions change, so it's crucial to monitor and update strategies, and to have a monthly loss limit (e.g., 1000 points in mini-index) to protect the account. - **Final takeaway** [20:31] — Negative risk-reward works only with a high win rate, a well-structured strategy, and rigorous risk management. The choice between positive and negative risk-reward depends on the trader's psychological profile and ability to stick to rules. ### Conclusion The video concludes that negative risk-reward trading can be a viable approach, but only when paired with a high win rate, a tested strategy, and strict risk management. The presenter emphasizes that the choice of risk-reward ratio should align with the trader's personal operational profile and psychological resilience. ## Transcript technical analysis course and my teacher said it 's wrong to trade with a risk- negative-reward ratio because the numbers don't add up. The right thing to do is to lose by a small margin and win by a large margin. Let's go. I learned a cool strategy where the target is three times larger than the stop loss. Beauty. I'm going to wait for the price to hit the bottom of the donch channel, and when the price retraces to the nine-period moving average, I'll sell with a stop loss of R$100 and a target of R$300. My daily goal is to make R$300, so I only need to get one trade right. Let's go. Well, the first operation was a stop, right? Minus R$100. That's fine. My teacher said that if I get at least 33% correct, I can make a profit. Everything is under control. Second trade, stop again . A total of R$200 less. No problem. Everything is within the realm of probability. Minus R$300. Wow, it's getting a bit heavy, but everything's still okay. It's within the statistics. Minus R$400. Wow, does this really work? Is day trading not for me? It hit the bottom of the doncha channel there . But I'm afraid to open another sell order at the moving average and risk another stop loss. Ah, I'd better stay out of it . Wow, if I had opened that trade, I would have won. I would have already recovered a good portion of my losses. recovered a good portion of my losses. But I lacked confidence. But, but let me see something. What if I had reversed the risk-reward ratio in each trade? What if I used a R$ 300 stop loss and a R$100 target? trades and I would have made the R$300 I wanted, much faster. Wow, is it really so wrong to trade with a negative risk-return environment? I felt so bad trading with risk-reward because I took so many losses. Is it really that because I took so many losses. Is it really that wrong? happens every day to thousands of traders. And in the next few minutes I'm going to show you the truth about the risk-negative-reward ratio, how I've been operating this way for almost 10 years in my real account, in the tests and proprietary trading sessions I've been through, and how operating with a risk-negative-reward ratio works better for me than aiming for targets two or three times larger than targets two or three times larger than the stop loss. Come with me, man. Look , for almost 10 years I've only traded with a risk-negative return. The target there is twice as small as the stop loss. Sometimes I use a target that is three times smaller than the stop loss in my real account, in the proprietary trading desk tests I've been through over the years, and it works. But Pio, everyone says that the right thing to do is to have a target twice as big as the stop loss, or three times bigger than the stop loss. Ideally, you should have a positive risk-return ratio. Everyone says it's crazy to trade with a risk- negative return. It doesn't make sense. I know, man, everyone says that. Mathematically, it makes sense to operate with a risk-reward ratio, but nobody tells you the other side of the story. Nobody tells you that by operating with a positive risk-reward ratio, your success rate will be extremely low. Nobody tells you how many stop-loss orders you'll take before the price hits a target, for example, three times higher than your stop-loss order. And the answer is: you're going to take a lot of losses. So, let's say you operate like this, right, with a target three times larger than your stop loss. And their strategy has about a 50% success rate. In other words, you'll be essentially flipping a coin to decide whether to strategy like that, man, just know that you're going to take a lot of losses before the price hits your target. Because the further away the target is, the harder it is for the price to get there. before it probability. Oh man, the stop loss is right here, the target is way over there. So, in practice, you'll be hitting your stop-loss order many more times before the price picks up , you understand? And what tends to happen is long sequences of stops. But wow, Pio, with a target three times larger than the stop loss, when you're making a profit, you make a big profit and end up recovering. Yes, man. Exactly. Mathematically speaking, it makes perfect sense. When you lose, you lose win a lot. Then you recover, the account closes. And all of this sounds very nice in theory. Now tell me, how many people do you know who can withstand multiple consecutive stop-loss orders without breaking their own rules, without increasing contracts, without forcing a trade, and most importantly, without abandoning their strategy? If that's truly your operational profile , if you can handle it, then everything's fine. But I'm sure very few people could put up with that. Dude, we already know now that trading with a risk-reward ratio breaks most people emotionally. OK? But why the risk-return negative? Wow, setting a target lower than the stop loss has worked for me for almost 10 years in day trading. I'll explain it to you. We've already understood that one of the reasons why the positive risk-return strategy generates many stop-loss orders is that the target price is too far away from the stop-loss. So the result is that the price hits the stop-loss much more often before capturing a profit. In contrast, with negative risk-return, the situation is reversed. The target is very close to the stop loss. And the result is that triggering a stop loss. It's a matter of probability. The closer the target, the easier it is for the price to reach it. hit your target before the stop loss. It's that simple , but there's a critical detail. The risk- negative return strategy only works if you have a high win rate. So, if you trade, for example, with a stop loss twice the size of your target, you need at least a 67% success rate to break even . Now, if you operate with a stop loss three times larger than the target, you need at least a 75% success rate to break even and avoid losses. For example, I recently demonstrated a strategy in the VIP list group for the Pilsar 3.0 method, and description of this video. And this strategy is operated with a stop loss three times larger than the target. But now in April 2026, trading in the afternoon, which is when I have time to trade on that account, I showed that this strategy had a 93.3% success rate. So I quickly hit my monthly target with this strategy, and it's operated with a stop loss three times larger than the target. And my success rate was well above 75%. This is actually the Pilsar 500 strategy, which is part of my operational method, the Pilsar 3.0 method. The link to the VIP list group is in the description, it's free, and there you can watch this video where I show these statistics in more detail, okay? Beauty? But continuing, when you operate with strategies that have this type of risk-reward ratio, negative risk-reward ratio, you end up having far more gains than losses. And that motivates you, that makes you more confident and strengthens your emotional control in day trading. And then when the stop loss comes, because it will come, right? when that happens, you're psychologically more prepared because you know that statistically you tend to have more positive days ahead, you know? But that's not the only reason why the negative risk-return strategy works for me. This risk-reward strategy has worked for me for almost a decade, not only because of the high success rate, but mainly because I've found a risk management strategy that protects me, you understand? I'm going to show you exactly how I operate. When I 'm operating a strategy where the stop loss is twice the target, my daily goal is always two is one stop loss. Now, when I 'm operating a strategy where the stop loss is three times greater than the target, my daily goal is three consecutive wins and the daily loss limit is one stop loss. If I hit the target, I'll stop trading. If I reach my daily loss limit , I also stop trading. risk management strategy, I never lose more in a day than I have a chance of winning on that same day. And now I'm going to show you two examples in the chart of strategies with negative risk-return that are working well in 2026 to prove my point. Pay attention to the numbers. Setup one. Target twice as small as the stop loss. Take a look at this setup, man. I introduced him to you last Sunday, April 12th. In reality, in this setup, we don't use a stop loss that's twice the target value. In reality, the risk- return ratio here is one to 1.171, right? Because the target is 175 points and the stop loss is 300 points. But I'm going to modify it here, look, to a 300-point stop loss and a 150-point target. Now we have a stop loss that is twice the size of the target. As I said, this strategy was presented on April 12th, and in the upper right corner there's a card for you to okay? Here's how it works: you use the 15-minute timeframe on the 1-minute timeframe on the left. Following the strategy I showed you last Sunday, when a candle closes red on the 15-minute chart (remember, this is the P Trader algorithm coloring), we 1-minute chart. We wait for a candle to close, look, negatively, touching the happened here, look, we place a sell order at the high of this candle in this way , look. So, in this operation, on April 13th, that is, one day after I posted this strategy on the channel, we had a sell order triggered exit the operation. So here we would have the first profit of the day. And notice this: this candle here also closed negatively, touching the bottom of the channel, and the candles here, look, they were still red, right here. Then we could sell again at the high of that candle. So, as you can see, look at our sell order, which was placed at the high of this candle, and would be triggered in this region here. The price goes up a little, but when it down here. So, that would be the second gain of the day, a positive area goal achieved. That was on April 13th. Let's move on to April 14th. This is April 14th. Notice that this candle closed in the green on the 15-minute timeframe. We're from here we start looking for things to buy. Notice that this candle on the touching the top of the Doncha channel. Then, place a buy order would then be triggered at this point, and the price up here would reflect the transaction. That would be the first profit of the day. After that, you realize we had another candle here, look, that closed touching the top of the buy again at the low of the candle, buy order would be triggered here, and the price would then be adjusted up here, exiting the trade. This would then be the second gain of the day, a positive goal achieved on April 14th. Let's take a look now at April 15th. Just look. On April 15th, we had red. We wait for the second candle of the day to open, and from there we expect a candle to close negatively. Look, touching the lower part of the candle. So, you see, our sell order would be triggered at this point, and down here the price would catch on and exit the trade. That would be the first profit of the day. were still red here at 15 minutes, we had this other candle that closed the Donche channel. We'll sell at the peak of this candle again. Look, right here, the price below shows the exit from the trade; this would be the second profit of the day. Positive goal also achieved on April 15th. Let's take a look now at April 16th. Look, this is April 16th and you can see that this candle turned blue. We are therefore expecting the next candle to open, in this case, this candle here. And from that moment on, we started looking for purchases in a minute. touching the top of the Donch channel. So I place a buy order at the low of that candle. Notice that the next candle would trigger our any heat it would already capture this operation up here . That would be the first profit of the day. After that, we had this other candle that also closed positively. Look, you can see that the candles were still blue; we would buy at the low of that triggered at that point. Look, as you can see, and up here the price catches exit from the trade, it would also be the second profit of the day, a positive target achieved. So, man, I showed you this strategy on April 12th. If you started trading it on April 13th, you've had a 100% success rate so far. If you traded five mini- contracts here, look, in those 4 days you've already made R$ 1,000. You traded with 10 mini contracts, you've already made R$ 2,000. And it , with the stop-loss twice as large as the ALFO (Alphabet). And in the year 2026, for now, this strategy has approximately 80% of its collection. In other words, this strategy is 13 percentage points above the break-even point, because the break-even point is 67%, which means the strategy has a safety margin. It's not hitting the limit, it's well above what's needed for us to make a profit, you understand? Let's take a look at setup two now. We use a stop loss three times larger than the target, that is, the stop loss is 300 points and the target is 100 points. Stop loss three times larger than the target. This is an indicator that shows buying regions and selling regions, okay? I developed this indicator for students of the Pilsar method. I am still conducting all the tests on this indicator to find the best after that will I give this indicator to the students, and I'll also post it here on the channel for you to test for at least two months, okay? Continuing, in this setup we use this buy and sell indicator plus this buy and sell indicator plus these three moving averages: 17, 72, and 144. idea is pretty simple, man. Just look. If the moving averages are crossing downwards and the word "sell" appears above a candle, then I place my sell order at the high of that candle. Look, a sell order at the high of this candle. But below, a sell order also appeared, so I'm placing candle. And so I will continue until my order is triggered. In that case, at this point here, look. So, a sell order is triggered here, and the quick scalp of 100 points. So here I would have the first profit of the day. This is April 15, 2026, okay? After that, I realize that my would be at the high of that candle. It also says "sale" and the symbols are crossed out downwards. The sell order would then be triggered at that point, and the price below would then drop another 100 points for exiting the trade . And here we had several buying signals, but since the averages are crossing downwards, I'm going to ignore all of these buying signals here. I'm going to focus on sales signals only. Later on, still on April 15th, we had this last signal sell order would be executed here, and down here the price would exit the trade, making it the third profit of the day, and I would have reached my positive target on April 15th. That's because when I trade with risk-reward, where the stop loss is three times greater than the target, I need three consecutive wins to reach the daily positive goal. That was April 15th. Now, if you look at April 16th, we had the first signal executed, right? A buy signal at the low of trading session, because the moving averages were crossing upwards, the indicator showed a place my buy order at the low of the candle. Then, noticing the price falling, I trigger my buy order, it goes up again, and I take the exit from the trade. That would then be the first win of the day. Then the other signal that was actually executed, another buy signal also at the low of this candle here. Look at this because the averages were crossing upwards and the indicator signaled a buy at the low of that candle. So the price drops, triggering my buy order right here, look, and when it goes back up on this candle, I'll exit the trade; that would be my second profit of the day. Then we had some signs of selling here, look, the averages then crossed downwards. Look, as you can see, this candle generated a sell signal for us , since the indicator showed a sell signal at the high of this candle. This means there's a resistance point here where I can believe in the sale, you understand? So, my sell order being taking the exit from the trade would be the third profit of the day and would also mean profit of the day and would also mean reaching the positive target on April 16th. the strategy. In April 2026, it has 28 wins and two stop losses. This means 28 wins and two stop losses. This means she has a 93.3% accuracy rate. Given that when I operate with a negative risk-reward ratio, where the target is three times smaller than the stop-loss, in order to avoid losses, I need to have at avoid losses, I need to have at least a 75% success rate. And this strategy is proving to be 93.3% successful. It's 18 percentage points above breakeven. That's a very large safety margin. And just to wrap up this issue regarding this strategy, this indicator is still under development, it's still in testing, but as soon as I finish testing and developing the strategies based on this indicator, I will deliver it to the students of the Pilsar method. And you guys here on YouTube, who aren't my students, you 'll also be able to test this indicator for at least two or three months, at no cost whatsoever. But for now, this indicator is still under development, and I still need to find the best settings for regarding those two setups I just showed you, what does that mean? Wow, these two examples illustrate something very clear. The risk- negative return strategy works if you have a high win rate, well above the break- even point. If you have a well- structured strategy, that is, with clear, objective, and tested rules, and it also works if you have rigorous risk management that protects you with daily goals and limits, you understand? When you combine these three things, the risk- negative return has a very high chance of working out for you. But listen, I need to be honest with you. Not everything is rosy. Even when trading with a target smaller than the stop loss, even with a well-structured strategy, there will be times when the market simply won't be favorable for your strategy and you'll experience a series of losses. That's normal, it's part of the process. And what's more, sometimes overnight, a strategy that was very good can simply stop working because the market changes, the volatility changes. And that's why I always say, both here on YouTube and in our Telegram group, that you need to monitor your strategy and update it whenever necessary so that it keeps up with the current market behavior. So how do you protect yourself from that? How can you protect yourself from the bad times your strategy will face? Dude, it's always important to have a monthly loss limit. For example, in the mini-index, if you lose 1000 points in a month, you stop trading, it's over. You wait until next month. This way, you cut the fastest losses at a point where you are still willing to accept losing. You're not going to keep insisting on a strategy that clearly isn't working that month. You don't destroy your account by trying to recover it. You simply stop and, if necessary, you analyze your strategy, you adjust your strategy, and you come back the following month. Oh I don't have time to keep up with and update the strategies. I don't have time to develop good strategies. Dude, relax. If you work or study, or you simply can't description of this video I've left a link to the PSA 3.0 method, where you'll find the same strategies and robots that I use in my daily work. And in this way you will have a complete portfolio of strategies and robots to attack the mini-index from various fronts at the same time in day trading, thus increasing your chances of success. The link to the Pilsar 3.0 method is zero. It's in the first pinned comment. Well, man, what I showed you today isn't theory, it's what day trading. So, to always remember, the risk-negative return strategy does work, but it only works if you have a high success rate, a well- structured strategy, and rigorous risk management ; otherwise, the chances of the risk- negative return strategy working are very small in the long run. But now, of course, this isn't about being right or wrong, it's not about the risk-return positive being better than the risk- return negative. It's about choosing what you can accomplish without breaking your own rules. If you can operate with a positive risk-reward ratio , even with a very low success rate, no problem, man. This is the risk-reward ratio you have to choose. Now, for me, for almost 10 years, it's the risk-negative-return strategy that works. I couldn't handle the risk-return ratio, but that, I repeat, is just me. This is my operational profile. It doesn't mean it's the best, but it's the best for me. If today's lesson added any value to your life as a day trader, if you took at least one valuable thing from it, leave a like, subscribe to this channel with the notification bell activated, because I wo n't rest until you become a staying here, man. Until the next video. These are the strategies from the Next version, meaning they are the new Pilsar strategies that utilize the Pilsar indicator and coloring . And another interesting thing is that all of these strategies here are automated. When you get to this module back here, look, robot settings, you'll find the Pilsar 400 Next version robot. You will also find the Pilsar 500 Next version robot, the 600 Next version robot, and the Pilsar 700 Next version robot.