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In Trading Ranges 80% of Breakouts Fail.
Probability is rarely better than 50% ?
Probability is rarely better than 50% ?
Yes, there are 30-40 bars in that chart but only in 7 of them (the 5 marked stop entries and two more), at the extremes of the TR, the probability is higher than 50%. For all the reamining bars (30+) the prob is around 50%. So with 7 out of 30-40 Al says rarely.
So for good reversal setups in the upper & lower third of a trading range, the probability could be closer to 80% ?
Such a high probability can be achieved only if you use a wide stop and scale-in (not recommended until you are profitable). The first entry, if good like the ones marked on the chart, has a 60% probability to reach the middle of the range.
So the 80% and the 60% are different probabilities: 80% goes for the whole number of BO attempts and the 60% is for each of those attempts.
The reason for not recommending scale-in for beginners is because all trends start from the inside of TRs so if you scale-in when the trend has indeed started then the 80% does not apply and indeed you havea a 60% of breaking beyond the TR, so the total loss will be huge.
