There are as many methods to trade as there are traders. Indeed, probably more methods than traders, as many traders have multiple methods that they use. Ultimately creating or finding a successful trading method boils down to a few very definitive steps. No matter what, even though many are unaware of it, the first stage … [Read more…]
An interesting question. What lies behind it? A belief held by many traders that they must have a win rate where they win 70% or more of their trades and also be able to place their targets using some magic ratio (usually 3:1), the distance from their stop. Of course, the stop must also be … [Read more…]
I can hear you asking:”What in the blue hell is an EVRatio?” To put it simply, the EVRatio (as we shall choose to refer to the Expected Value Ratio) is the true Reward/Risk ratio of a trading method, after the probabilities of the exits (both target and stop) being hit have been taken into account,. … [Read more…]
In Part 2a, we showed how despite using the much vaunted 3:1 reward/risk ratio of 3:1, a trader could still end up with a losing trading system. We asserted that the profitability of a trading system depends not only on the relative sizes of the distance to target and stop, but also on the probability … [Read more…]
So you have obeyed the gurus, who told you that in order to be profitable, you must have your target at 3 times the distance to your stop; and that that should pretty much ensure your success. You have done it, but you equity is still going down. Now you want to know what is … [Read more…]
How many instances of the setup to examine. In Part 1a and Part 1b of this series of posts, we examined how to determine the likelihood that our exits will be hit. In that particular post, we posited looking at 100 setups, and I said that that was because it made the analysis simpler. Heard … [Read more…]
What do the counts mean? In Part 1a, we examined how to determine the likelihood that our exits will be hit. In that particular post, we posited looking at 100 setups, and I said that that was because it made the analysis simpler. Our first order of business is to use our counts to determine … [Read more…]
Starting with the basics “Trading with Expectation.” What a strange statement? Do we not always trade with expectations? Of course, but the word I used is expectation, not expectations. There is a difference; and it is not just the “s” at the end of the word. Every trader has expectations, usually of gain, when they … [Read more…]
In this coming series of posts we shall examine how to trade with statistics of price movement. For now, our sequence shall be: Part 1: Determining how likely our exits are to be hit. Part 2: Determining the Expected Value of our trade before we make the trade Part 3: Evaluating the trade from the … [Read more…]
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