Top Pick Trading Forum

Thank you very much for that, Eric. That helped me frame my thought process.

Cheers! And good trades to you as well!

There are a variety of ways to approach this, and the statistical method outlines simply being able to take advantage of an edge. But how that edge is defined is important.

It is possible to trade an edge with 40% probability of success ----> The return must be on avg 2x the risk.
It is possible to trade an edge with 50% probability of success - - - - -> When the return is slightly more than 1:1 one is profitable.
It is possible to trade an edge with 70% probability of success - - - - - - > The return can be less than 1:1.

In all of the above cases though, what the actual edge is ISN'T DEFINED!!!!

Markets often have patterns which they trade around. Being able to read context, and especially directional bias, allows for a stronger selection of entry criteria. 70%+ probability doesn't happen all of the time and therefore becoming aware of how the market moves becomes important.

A stop loss is to protect yourself. Where it is placed is representative of when "you are wrong" because the market will have moved to a place where the edge did not play out into your favor. It is where one is wrong on the directional bias based on the entry.

The selections which Mack marks are based on both context, and where if the signal bar is exceeded, the immediate directional bias is incorrect.

Hopefully helpful and good trades to you!

It crossed my mind while trading today that I have been using the stop-loss as a profitability guarantor rather than a fail-safe, if that makes sense? To hopefully clarify, I've loosely modeled my risk-managment from the casino model of volume + slight statistical edge = profitability. However, the market (the ES/MES in particular since that's what I trade) doesn't seem to work that way. Somewhere along the line I learned to over-expect losses, so I started to try and use losses in the aforementioned fashion.

But, today I started to finally see what Mack has said about how efficient the ES is and how it takes a great deal of directional movement just to get the 6 ticks required for a simple 1 point scalp. That made me aware of my critical trade portals (entry, target(s), stop-loss). When I saw this, I immediately noticed how poor my choices of where those points lie are, and that if I simply followed Mack's admonishions to "buy low and sell high" within the current range of price, there were a LOT of opportunities for profit - based on my current chart-reading ability - that I had never seen before.

I will ruminate on this much more, and test my hypothesis, but I am very curious to any insights/knowledge on this. Thanks to anyone who shares their thoughts on this topic. I hope it was clear.