The What Why and How of High Probability Trading Strategies

Aug 7 • Forex Trading Strategies • 2434 Views • 1 Comment on The What Why and How of High Probability Trading Strategies

Forex trading is all about making the most profit in the least amount of time repeated again and again. This also means minimizing the risk of loss or at least not committing the same mistake twice. This article will discuss the basics of high probability trading strategies as a means to achieve that goal.

What are High Probability Trading Strategies?

The definition is fundamentally the same in that it is a trading strategy for the purpose of increasing the probability for profits. However, the means used maybe different in that one strategy may emphasize a high probability of getting huge profits sacrificing the number of trades to participate in. The other emphasizes positioning oneself for more trades but with lower profits per trade. Simply put the former is quality the latter is quantity.

Why Should You Specialize in High Probability Trading Strategies?

The simple answer is that it maximizes profits and minimizes losses. This is really a no brainer and you should emphasize more on why you should specialize in one form over the other (high yield with low trade or low yield with high trades). There is no universal answer to this, rather it depends upon your personal circumstances as well as preference. For example:

  • Mr. A who has a full time job and less time dedicated to forex may want to specialize in low trades with high yields.
  • Mr. B. who has no full time job or works at home may have time to actually follow and/or participate in several trades per trading day.
  • Mr. C just likes the feel of being in a high pressure environment with several trades to look out for
  • Mr. D prefers well researched trades, sacrificing quantity over quality

 

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How to Perform High Probability Trading Strategies?

First you need to understand the basics of forex trading. This can be realized via formal education or even online courses. The important thing is you pay attention. Next is practice. You do not really need to do this with your own money. Sign up for free forex demo accounts and take advantage of the practice account that it provides.

  • Read forex indicators. Start with the basics (i.e. RSI, Bollinger bands, oscillators, etc.). The important thing is to be able to translate the raw data in these indicators cross referenced with each other and then come up with an analysis that is accurate.
  • Determine What Indicators are relevant. Different trading strategies require different indicators. For example, if you want to determine volatility you look at Bollinger bands. If you want to determine breakouts you look at oscillators.
  • Rate each trade. You can rate trades from 0 to 10 with 0 being the lowest and 10 having the highest probability. For example. Mr. A is looking to trade in a short position. Mr. A starts to look at Trade X and at the start assigns it with 0 point. Mr. A checks the RSI and stochastic which seem to be in falling steadily towards the overbought position, plus 4 points. EMA’ turns downward, plus 2 points. The alligator oscillator shows that the alligator is about to wake up, plus 2 points. Mr. A has 8/10 points. Thus there is a high probability that the trade is going to turn a profit for him.

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