High Probability Trading Strategies

I hope all book readers have incorporated Multiple Time Frame Momentum setups as part of their trading plan. I describe in the book how you can use almost any price oscillators for this critical trade filter. I’ve been doing some more short term trading the past few weeks since I am settled for the summer-fall season before I leave for warmer climates this winter.

I continue to be amazed at how well the Dual (and triple)-Time-Frame-Momentum setups alert me to high probability trades and, just as important, keep me out of less optimal trades when I get excited about a pattern or price position for the Dual-Time-Frame-Momentum is not setup.

In DT, once I’ve identified the 60m momentum position, I just set the 15m minute DTosc reversal alert to send me a text message and go about my business until I get the alert that the setup is complete. Then I can take a quick look at the chart to verify the position of set the buy/sell stop for the trade.

Don’t fail to incorporate this power strategy with any market and any time frame. Your results should improve dramatically.

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Many traders, particularly those who are new or have not been successful, make trading way to complicated. They take in way too much information, much which is irrelevant to identify a trade opportunity. Often they have very extensive and complicated trading plans with inputs and rules that they may not understand and have not clearly thought out how they will benefit the trading decision.

Just a couple of logical, well thought-out rules should be all a trader needs to gain at least a modest but consistent profit. In High Probability Trading Strategies, I describe four key factors (pieces of information) to use to identify a condition with a high probability outcome – multiple-time-frame momentum, simple pattern position, price position and time position. Each factor is extensively described and illustrated in its own chapter and the video CD that is included with the book. A trader should master each, one at a time, until he or she not only knows how to use the information for a trading decision but why.

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The key principle of High Probability Trading Strategies is to identify conditions with a high probability outcome and acceptable capital exposure. You can never know the outcome. You can never control the outcome.

You do control what information you will use to make a trading decision, and you do control the activity of trading, to buy, sell or do nothing. To improve as a trader, only focus on what you can control. Learn to only focus on information that is relevant to your trading plan to make a trading decision. Focus on implementing your trading plan.

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I recently had a High Probability Trading Strategies book reader and DT Forex Report Subscriber inquire about stop loss placement on a potential trade setup we noted in a recent report. His question was regarding a potential trade setup in the report and the potential initial capital exposure. The initial stop loss would have been too far away from the entry to limit the initial capital exposure for his trade plan.

Firstly, our DT Daily Forex Report uses 60m data to identify intermediate term swing trade setups. We only make general trade strategies, not specific trade recommendations because the report is just issued once a day. Readers that apply the trade strategies taught in the book can usually identify setups with much lower initial capital exposure when the trade execution conditions are made.

But, the real lesson here is what if an ideal setup is made, but the objective entry and initial stop loss will result in more capital exposure than allowed by your trading plan as described in the book? Perhaps the lower time frame momentum did not make a reversal until the market had moved a considerable length away from where the stop is to be placed.

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Jordan posted a comment to the Win/Loss Ratios, Risk and More blog piece. I began to make a brief comment to Jordan’s comment which turned out not to be not so brief. So, I thought I would post it as a blog piece instead.

Firstly, I appreciate everyone who comments on the blog commentaries. Especially those who use there actual names and include a picture! Thanks Jordan.  

Don’t confuse win/loss ratios with reward/risk ratios. There is a section in High Probability Trading Strategies that clearly shows how bogus pre-trade reward/risk ratios are. There is no objective method to determine the potential reward for a potential trade. So there is no objective way to determine a “risk/reward” (reward/risk) ratio before a trade is made. The risk portion (better called capital exposure) is defined by the difference between entry price and initial protective stop price. It is known in advance.  But, the “reward” portion is nothing but a best guess. All risk/reward strategies are bogus.   

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