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Hello I have a question? I have been through most of the on line course and I am confused with the traders equation calculation.
Hi Jason,
I see you joined the course 3 months ago. So having done the whole online course seems pretty fast to me.
Everyone has his his own level of skills and talent, so not judging your specific case. But on average, I think 3 months is not long enough to gain a deep understanding of the principles.
But to answer your question:
The only situation where you need a reward at least twice the risk, is in Major Trend Reversal trades (for a swing). In that case, your Stop Loss will always be relatively close to your entry. And almost in any case, where you reach your minimum target (minimum two legs), you will have a profit of at least twice your risk. Of course, in this case, you're often whipsawed: 60% of the time, and this under the condition you've picked your MTR-setup well.
In case of a BO-trade, where you have a 60-70% chance of a MM, I think it's not so easy to distinguish between a real BO-setup, and a strong leg within a TR.
Speaking for myself, I often think I was able to identify some BO, so I take a very small position (1. because my SL is far away, 2. because I want to be able to take a 2nd half position in case the BO completely reverses). But even then, I find it very difficult. I always run into some support or resistance. Those S&R-levels narrow down, the market is going into BO-mode, and you're left with a 50-50 chance of profit-loss.
Al advises to start off with MTR-trades. I thought BO-trades were much easier, but I'm starting to understand why MTR's might be better after all to start with.
Hope that may help a little.
That does help thanks for the reply.
I just was caught up on the actual risk vs initial risk taught in the course. I don’t understand that variability when risk is used for the position size calculated at entry. It seems even if you were at 60-70% prob. If you had your winners taking profit at 1.5 or 2 times initial risk and you take your loss at actual you would be upside down in the long term. No?
And yes….I have watched the videos non stop and simulator for practice. Still beginner ..eye opening info…and want to keep learning.
It seems even if you were at 60-70% prob. If you had your winners taking profit at 1.5 or 2 times initial risk and you take your loss at actual you would be upside down in the long term. No?
I honoustly don't have a clue. It's very hard to tell, if you don't keep a journal, and categorize your trades, I think.
I'm also still studying. I use a very labour-intensive method of studying. So I have a few more years to go.
Thanks everyone for the help!! Makes sense
