Usages

What is a good chance?

Some people always say 3pips is a “good” chances. And surely thousands of “good” chances every day. DO NOT BELIEVE THEM! They will burn all your money!
My definition on daily charts:

Good chances should at least bring 200pips of profit with a risk of smaller than 50pips. Such good things should be few as around once a week.

Bad chances should bring at least 100pips of profit with a risk smaller than 30pips. You can find this kind of chances every day.

No chance none of above.

My definition on hourly charts:

  • Good chances should at least bring 30pips of profit with a risk of smaller than 10pips. Such good things should be few as around once a day.
  • Bad chances should bring at least 20pips of profit with a risk smaller than 10pips. You can find several chances every day.
  • No chance none of above.

In the following slides, I will give some samples on daily charts. For hourly charts, take profit should be set to 30 pips. Stop loss will be 10 pips.

1. Take profit: How much can we get? At most.

In this chart, we can at most get around 50 pips.

only50

In this chart, we can at most get around 100 pips.

only100

In this chart, we can at most get around 200 pips. Consider to have a trade here.

only200

In this chart, we can at most get more than 200 pips. Trade here!!!

more200

3. Stop loss: How much will we lose? At most.

In this chart, we will at most lose around 50 pips. We can bear this! If the profit is more than 200 pips, we can take a trade here. But remember, the evil is over there, you had better set a stop loss around 70 pips.

loss50

In this chart, we will at most lose around 20 pips. We can bear this! If the profit is more than 200 pips, we can take a trade here. But remember, the evil is over there, you had better set a stop loss around 50 pips.

loss20

In this chart, dark knight(The black evil bar, who is the enemy of every trader) is vanishing other traders. If the profit is more than 200 pips, we can take a trade here. But it is pretty dangerous to act against evil.

lossminus loss20

In this chart, loss is more than 100 pips. Why should we bear this kind of loss. So no trade here.

loss100

4. Trade Test

Answer the following question to check whether you understood the strategy?

  1. Current potential stop loss is 25 pips, potential take profit is 125 pips, will you enter a trade?
  2. Current potential stop loss is 125 pips, potential take profit is 325 pips, will you enter a trade?
  3. Current potential stop loss is 50 pips, potential take profit is 225 pips, will you enter a trade?
  4. Current potential stop loss is 25 pips, potential take profit is 225 pips, will you enter a trade?
  5. Current potential stop loss is 325 pips, potential take profit is 125 pips, will you enter a trade?
  6. Current potential stop loss is MINUS, potential take profit is 125 pips, will you enter a trade?

Scroll down to see answer!

Answer 1. No. Too small profit.
Answer 2. No. Too big loss.
Answer 3. Yes.
Answer 4. Yes.
Answer 5. No. Only crazy guys will take this kind of position.
Answer 6. No. Profit is not enough.

5. Remark

  • Market is a bad boss.
  • He never give what he has promised. 80% of expected profit will be good.
  • Ready to run when dark knight start to vanish.
  • Always take better position if possible.
  • A 50pips stop loss is always worse than 30 pips stop loss if both can make your position safe.