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Hi everyone,
In the course Al Brooks said: Try to take the reward 2 times the risk if not sure the probability is not greater than 60%.
I don't really understand what it is? Is that mean If I set the RR=1.1 or RR=1.2 the probability is still the same??
But as I experienced when we talk about the probability, we also need to talk about the RR. They come together.
For example: When I go in a breakout setup, I put my SL below the low of the BO leg and set RR=1.1 so the probability is 60%. If I set RR=1:2 now the probability have to lower like 40 or 50%.
I think. In a trader equation. If I increase RR then the probability have to be lower. If I decrease the RR then the probability going to be higher. RR we can change but probability we cannot. That why we need setup but not random trade.
Is anybody understand what Al Brooks trying to say? Please help!!
Hi Pham
In the course, Al describes some setups which have probabilities of at least 60% at a R:R of 1:1. He describes other setups which have probabilities of no more than 40% (eg most reversal setups) at R:R of 1:1. The 40% prob setups wont have a positive traders equation unless you assess they are capable of reaching a R:R of 1:2.
The course and also your ongoing experience teach you 1. to better estimate setup probabilities and 2. how to incorporate rules (if you wish to add complexity to your trading - many traders, instead, prefer to keep it simple) to improve the traders equation (eg scaling in, scalping out).
Hi Graeme Brindley
I understand now.
Thank you for your support.
