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**Q. In this context, is “70%” directional probability or probability(chance of success)?**

In this video, Al says “This is a strong enough breakout to have a 70% chance of at least lower prices.” (13:40)

I thought it is a probability to reach the MM, but that makes contradictions, with the law “HighRisk-HighProb, LowRisk-LowProb”.

So, to me neither.

Sounds like a “chance of exit more than breakeven” because of those confusions.

And that makes questions.

If it is *a directional probability*,

**1.** Does all reasonable entries with different stops have the same *directional probability *(as long as the stop is not like 500pips or 1pip)?

If it is* a probability(chance of success)*,

**2.** Does each reasonable entry with different stops have a different *probability(chance of success),* because of different risks?

**2.1.** If 2 is true, is the entry with the widest stop always the best, because of the highest probability(highest risk) with the same risk-reward ratio?

**2.1.** If 2 is false, is that because *probability(chance of success)* is based on good management and all entries have the same reward(price movement) with a different risk-reward ratio in hindsight?

If it is neither,

**3.** Does “70%” simply mean “the chance of at least lower prices” which allow exiting more than breakeven?

**3.1.** If 3 is true, **how would you know it has a positive trader’s equation without expectation of reward(amount of price movement)?**.

**3.2.** If 3 is true, what probability do you use to know the trader’s equation is positive and where is that come from.

**3.3.** If 3 is false what is it.

directional probabilityThe probability that the market will move either up or down any number of ticks before it reaches a certain number of ticks in the opposite direction. If you are looking at an equidistant move up and down, it hovers around 50 percent most of the time, which means that there is a 50–50 chance that the market will move up by X ticks before it moves down X ticks, and a 50–50 chance that it will move down X ticks before it moves up X ticks.

probabilityThe chance of success. For example, if a trader looks back at the most recent 100 times a certain setup led to a trade and finds that it led to a profitable trade 60 times, then that would indicate that the setup has about a 60 percent probability of success. There are many variables that can never be fully tested, so probabilities are only approximations and at times can be very misleading.

Glossary of terms for price action trading

I understand that probabilities are only approximations, I don’t need to know the exact number yet I guess you can tell at least “more” or “less” than others and probability of what.

Thanks.

Q. In this context, is “70%”

directional probability or probability(chance of success)?

Chance of success for a second leg down.

If it is

a probability(chance of success),

2.Does each reasonable entry with different stops have a differentprobability(chance of success),because of different risks?

True, because different RR ratio.

2.1.If 2 is true, is the entry with the widest stop always the best, because of the highest probability(highest risk) with the same risk-reward ratio?

Nop, because you need to be confident that it is reasonable for the price to reach the reward. In the highest stop you drew, your profit target was as big as the whole day's range, so this was not reasonable. You should have therefore chosen any of the other two.

Thanks for your reply.

I understand that the widest stop trade on the pic is not reasonable, so pls forget about that.

If it is

a probability(chance of success),

2.Does each reasonable entry with different stops have a differentprobability(chance of success),because of different risks?True, because different RR ratio.

I don't get why these 2 trades have different RR ratios.

Does that mean the TP should be the same according to the PA in hindsight? To me, these 2 TPs are reasonable so look like the same RR.

Different risk does not mean different RR ratios, am I correct?

I thought the trader needs to know if the trader’s equation of the trade he'll take next is positive or not. And I have no idea **which number should I put into the formula** in this case. All that I have is Risk.

Or, we have no idea the positive equation is positive or not, yet is just "70% chance of success for a second leg down." enough information to take that trade?

I don't get why these 2 trades have different RR ratios.

Sorry, yes the way you drew them made a RR = 1 for both trades, so same RR ratio = 1. Yet, a reasonable target for both trades was a MM based on the opening range, so the lower stop had a slightly better RR and therefore a slightly worse probability. Once a swing sell starts, one very common target for the swing shorts is a MM based on the opening range but you have several choices for your initial stop. You could have even placed your stop just above the BO bar, because if the premise was for the MKT to be trending, it should not go above the BO bar, so another prob and RR. It is a decission to be made.

Does that mean the TP should be the same according to the PA in hindsight? To me, these 2 TPs are reasonable so look like the same RR.

Yes, but not in hindsight. Once the BO took place you had to anticipate a channel down to the MM unless the bulls created a swing setup or a BO, but none of those happened and the MKT drifted down to the target, and only then the MKT reversed.

Different risk does not mean different RR ratios, am I correct?

Nop, a ratio depends on two variables. But when you have a PA target, like here (Opening range MM) you can have different initial RR depending on where you placed initially your stop, provided you fixed the (PA) target. And once the MKT goes your way, you switch to actual risk making your minimum target 2xAR which, in this case, happened to be at your first target, where there was a PB caused by shorts taking profits tho bulss didn't show strength and therefore the MKT kept going down to the second target, the MM based on the opening range.

I thought the trader needs to know if the trader’s equation of the trade he'll take next is positive or not.

Absolutely.

And I have no idea

which number should I put into the formulain this case. All that I have is Risk.

The risk is the easy variable because it is given by the chart, the profit target is more difficult, here, as I said, a MM based on the opening range was reasonable. The MKT was AIS so 60% chance it went lower (here Al said 70%) so you take the sell and do not exit unless you reach the target, like here, or the bulls got a good setup or a BO.

Or, we have no idea the positive equation is positive or not, yet is just "70% chance of success for a second leg down." enough information to take that trade?

Yes, you need to have a positive trader's equation before taking the trade.

However, I am not thinking in numbers when I take the trade. This is how I think about it (maybe other traders can give a better or more correct explanation). I see the opening range and I sell its BO 1 or the FT bar (the MKT went AIS (Always-in short)), knowing high probability for another leg down at least. I see 2 COL (closing on the low) and know early bulls will be exiting below (so this is another good sell). I see another BO COL 3 and 4 FT and draw the 2 x AR (actual Risk) target, thinking high probability another leg down for the 2xAR to be reached. 5 another bear bar COL so bulls exiting and at 6 the MKT reached the first target.

6 was the third leg down so you could expect the bulls to come in but the channel down was tight and there was a magnet below (OR MM), so the first reversal was going to be minor and, therefore, you could either hold and see if bulls created a good setup or exit and reenter at the next bear setup to reach the lower target. Bulls didn't show up so at 7 still AIS and wedge at EMA so you could reenter, if exited before, and exit at target OR MM or when bulls created a setup, maybe at 9 LL MTR.

Thank you for your detailed explanation as always!

I think the reason I was looking for the numbers is just I wanted the confidence that I’m doing reasonably. I believe great price action traders have that kind of mindset you’ve told me, so I just keep following that way. Thanks.