I understand the concept of risk/reward and what you mean by "knowing the potential reward" but i never contemplate the reward aspect as a reason to take a trade. As you wrote the reward is just a potentiality or a projection in the future. Price action follows a structure, that's why we can win at this game. It's not completely random all of the time. I try to enter when price becomes less random so to speak and i never think about the reward aspect until i get there. When i am in a trade i just think about managing it. That's subtil but it can make a big difference in the approach.
Are you saying then that you don't care about risk and reward on each individual trade? That doesn't factor in to knowing if you should take or pass on the setup?
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Sure, I look at several time frame charts in the morning for key levels.
405 min I go back to the most recent hi/lo and look for HVN's and LVN's
135 min same as the 405 chart it just breaks it down into three sessions
10 min, 30 min and 60min charts for gaps, POC's and NPOC's
All sessions charts squeezed together looking for patterns
1 min and 5 min with key levels and vol.
I plot constant lines on a 1 min chart from the levels on the other time frame charts and try to make a case for confluence where several levels match up. The more the merrier, the more confluence the higher the O&P.
That's interesting and i'll check your journal to further understand your thought process meanwhile you did not really give any details about what makes you believe the odds are on your side when you take a given trade.
As a small retail trader we are not like a Casino owner where the odds are fixed and always on his side. A Casino owner knows the house edge is fixed and no matter his patronage, he always has the advantage over the trades given to his commercial establishment by his customers.
So i repeat my question, how do you know when you take a trade that the odds are biased in your favor ? In other words, you have more than at least 55% chance to succeed on the trade you plan to execute ?
If that's all we needed, trading would be somewhat easier. Belief in your system will help but it won't give you an edge. I am sure many gamblers have faith in their system but that does not change anything to the house edge. The house edge will still prevail independently of your belief.
The following user says Thank You to trendisyourfriend for this post:
An edge is only a set of variables . Spending a lot of time concerned about your variables you need to see is damaging to your psyche in regards to trading because no "perfect" or even "best" edge exists . Searching for the best edge is a futile endeavour . The psychological end of this applies to how well you can control yourself in regards to trading .
The sucess comes when you can balance self control , intuition ( the when and where on the chart to trade part , which IS critical ) and probabilities . Like a master poker player you just have to play out your hand thats dealt to you , thats it . If you dont get dealt the hand you like , you wait until you do .
I think I did explain myself very clearly. The more the confluence the higher the O&P. If you're asking for me to give you the winning percentage, I don't have that nor do I really care. In the uncertainty principle anything can happen. I also look at the context of the market.
As a suggestion if you haven't done so already you may want to read "Trading in the Zone" by Mark Douglas. What it sounds like to me is that you're searching for someone to say I have a 90% winning percentage with this setup. Every moment in the market is unique.
An edge is nothing more than an indication of a higher probability of one thing happening over another.