Currency trading, also known as Forex trading, is what I specialize in, so lets deal with this to start with.
Forex movement
Forex movement is measured in pips, so you either win or loose a number of pips in a trade. Let's say your particular method calls for a 30 pip stoploss (sl), and you're likely to make on average, say 95 pips if your trade works out for you. So you would set your R:R at 1:3 for your trading, that's 30 pip sl and a 90 pip take profit (tp).
Maybe with your method you can even get away with a 25 pip sl and a tp of 125 pips, so you would set your R:R to 1:5. Obviously it will be easier to take 90 pips from the market than 125 pips, so you will be likely to have more losers waiting on the 125 pips and having a smaller sl, but your 1:5 RR will cover those extra losses.
Optimization
It is all about working out the optimal settings for your trading method. The likelihood is that the smaller the sl, then the shorter the time frame (tf) you will be trading. Things can move quite quickly on a lower time frame (ltf), like the 15 min chart, so you may want to move out to a higher time frame (htf), like the 1 hour chart, where price moves slower. Therefore your sl may need to be 60 pips and your tp would be at 180 pips. Again it will come down to your trading method and personal preferences.
Trading Method
If you are confident in the trading method that you have developed and tested, then you don't need to try to run trades for hundreds of pips. Just stick to your sure 20, 30 or 40 pips with heavier risk. I know everyone likes to brag about pulling 200 to 300 pips and more from the market, but we are not here to impress, we are here to make money. The longer you stay in the market, the more likely it is that it will retrace against you.
Fear and Greed
I can assure you that many times you can be up 100 pips in a trade and it will start to come back against you, and you will see your trading profit start to dwindle before your eyes. How will you react as it retraces towards your entry level? How will your nerve hold out? Most traders try to pull too many pips from the market because they don't risk enough on the trade, and then try and make up for it by looking for extra pips.
Many professional traders are happy with 30 pips per day!
All pics courtesy of freeimages.com
My next post will look at what I believe to be the best method of trading.