Up or Down?

[sunnyskies]

This is just some general blabbering. If you were to take a position at some point on the chart. Your profit target would equal your stop and would be X points away from your where you were filled. So the "risk / reward" ratio would be 1:1. Would you be able to have more then 50% winning trades in such scenario? If I were to pick any 200 (or another statistically significant number) consecutive points on the chart of my choosing, and you were to take a position on each of them... would you have more than 100 wins? If not.... why not? Wouldn't technical analysis give you "an edge", point you to the "path of least resistance", the high probability path? Or is your edge derived from TA limited to very specific situations on the chart, "set ups", and you have no edge in all other situations?

 

[steve46]

The answer is (probably) "not", and the reason is the same as if you decided to flip a coin 200 times expecting to have 100 heads. Even though you should have equal chance of having heads and tails, in the short run the results will include "runs" of consecutive heads and tails. If I remember correctly, you would have to flip that coin over a thousand times to get a 50/50 distribution. Now for something that makes some sense regarding trading I suggest you look into what I used to use. It is called the opening signal. Simply put, the opening signal is the last price minus the opening price. If the result is positive by .25pts or more, you look for a long trade, if the result is negative by .25pts or more, you look to enter short. Regards, Steve46