Be sure with the TREND, when I say TREND you basically have to consider three types of trends:
1. Long Trend (Time frame is say Yearly/Six Monthly)
2. Mid Trend (Time Frame: 15 Days or Weekly)
3. Speed Trend (Time Frame: Daily or Hourly)
When all these 3 are in one direction (Trading Probability Increases), blindly take the trade.
(P.S. This is my assessment/view over the years of Trading experience that I have)
In general any favorable factor (technical or fundamental) increases the probability while any similar adverse factor decreases the probability.
But price action is the most important of all. Thus buying near any kind of support like prior swing low, trend lines is more favorable. Also buying when price retraces to other support areas like common moving averages (20, 50, 200), super trend, Fibonacci Retracement etc has slightly higher probability.
Traders mostly like to take signals/setups that occur near support/resistance.
Having said that would like to draw your attention to one very critical thing - with increase in probability 2 things decrease
- Risk Reward Ratio - trades become less favorable. Risk is high compared to expected Reward.
e.g. Buying on pullbacks/dips strategy
One can buy as soon as price approaches prior support even if the candle was a bear candle. Probability is 50-50. Price could continue going down. But the risk reward is very high. Risk is only till the support is broken decisively. While the reward could be any where near prior high/resistance area.
One can wait for confirmation i.e. price moves up and close above prior candles high. Probability increased to may be 55-45 or 60-40. But the risk also increases, in case price were to turn down and go through support loss would be higher. Also reward would be comparatively less since the entry is late.
- Number of Signals generated
e.g. Price Crossing Above 200 MA has higher probability of success than 20 MA. But 200 MA crossover signals don’t happen that often.
Thus there will always be trade-off. So if you get any system or trade that has over 55-60% probability, it is worth taking it.
Risk control is the simple and powerful technique for winning over the market always. Regardless of what strategy you follow, how markets/economy behave, what instruments you trade etc,… trust me… the number one way to increase profits and be over longer period in trading industry is that is it “Risk control”.
As you could have heard that the best fund managers’ job is that not making profits but controlling risks and making profits is the market’s job. Though this sounds good for investments , i tell you this risk control is at least 10 times better tool for making money in trading than how it helps for investments.
Spend more time to plan how to reduce risk in each trade. This works rather planning for finding profitable trading strategies. If you do that you will be consistently making profits while thousands of new traders fail and you wont complain any single day about as so many failed traders complain how markets behaved heartlessly.
thanks, any other way to increase trading probability u can think of?
Best answer indeed …
i completely agree with this.