How To Spot High Probability Trades

This week we’re going to learn how to spot high probability trades with price action analysis.. In fact, I should have posted this post(for want of a better word) right after  my What is Price Action Trading ? post Why do I say this?Because high probability trades are the showpiece of price action analysis.  Some traders even call them the holy grail of forex trading. As to whether that’s true or not, that’s another show.

So we’re going to do a few things today. First, we’re going to find out what high probability trades really are. Then we   cap everything  by learning how to trade high probability signals and setups.

So now that we’ve gotten the intro out of the way, let’s get into the small matter of:

What in The World  is High Probability Trading?

Well, high probability trading is the type of trading where you  only trade when your entry trade has a substantial chance of being a winning trade. The prevailing conditions in the market must be possible for your high probability trade to turn into profits That my, friends is what we call in forex lingo your trading edge. It is your ability to identify a trend in the market that will help you achieve a winning trade.

What make high probability profits so unique, unlike regular trades is that you don’t need to trade them daily. You only need to place a trade once a month,watch the trade rack up a ton of pips for weeks,maybe months, which will then fetch you huge profits.  And you don’t need to stare at the screen all day.You just set the trade, go hang out with your friends, and then come back and check the progress of your trade. It’s popularly known in forex trading circles as “Set and Forget. You simply  set your trade and forget about it. You just go and smell the roses and check on the progress of your trade later on in the day.   Sounds straight forward doesnt it?

Also, it’s very expensive losing too many trades in a row. So to avoid making too many forays into the market, and getting burned at the same time, you enter a few high probability trades that will bring you substantial profits. The moral of the story is less is more.Let’s take a look at an example of a high probability trade.

Each trader has his/her own  percentage threshold as far as winning. trade success rates are concerned. However, the general consensus among forex traders is that 60-80%(2 out of 3 trades) is the going target.

Let’s take a look at an example of a high probability trade.

High-Probability-Trading-1024x462

 

Here is a classic example of a high probability trade. the arrow shows a humungous 4000 pip gain in this trade. With such a huge positive, you can be sure to ring the cash register very loud with these profits.

 

Now before I move on,a word of caution: A word of caution: High probability trading is NOT Las Vegas Gambling. You  cannot wing it while entering high probability trades. Your trading edge must exist for you to make your trades. Failure to use wisdom could cost you your account.

Now that I’ve cleared the misconception about high probability trades, Let’s  move on to:

How To Identify and Trade High Probability Trade Signals and Setups

Next is the coup de grace:How to identify and trade high probability trade signals and setups. Now ask most forex traders and they’ll tell you that there are two main ingredients you need when trying to identify high probability trade signals and setups.And they are:

  • Support levels
  • Larger Time Frames

 

In case you don’t know by now the main feature of price action trading is support and resistance levels. These same support and resistance levels can be found in these large time frames which trigger these long trade setups. And these long setups can  can accumulate thousands of pips, which of course convert in to thousands if not millions of dollars. Not bad for a few months work.

So here is how you go about it.

  • First mark the support and resistance levels in the larger time frames and keep note of the distance between the price and the support/resistance levels. You only hit the price levels that are likely to be hit in 1-2 months time. If  your price level is too far off, don’t  bother losing sleep over that.
  • You must periodically check  your chart to see how the trade is doing. I’m not saying stare at your screen all day like a security guard.But you must pop in every and then to see what’s happening.
  • Once price gets close to the high probability trade setups, you need to start counting your money.Why? because  a good trade can fetch you profits exceeding what you’d normally make in 6 months. If your trading edge exists,it’s possible to accumulate as much as 1600 pips-which of course translates into tens of thousands of dollars. That should keep your head above water for a while  shouldn’t it?
  • But remember this. You may not always hit the jackpot when you make a  trade as the market may reverse against you. But at least you understand how the thousands of pips come about when the price hits the support/resistance levels.

Ifyou havent mastered support/resistance levels, dont bother messing with high probability trades. Revist my Identify Support and Resistance  Post

Now let’s take  a look at a high probability trade

Highprob-1

 

This, people is a high probability trade  in action. See how the price reacted when resistance turned into support. It also triggered these  1000+ pip moves, which of course means you’ll be laughing  all the way to the bank.

To solidify your understanding,let’s look at another  high probability example.

hiprob-1

 

This is another example of the price reacting to price levels with moves at 1000 pips. Also, With such  an explosive setup, you should be laughing all the way to the bank.

If you’ve stumbled in here looking to join the forex trade bandwagon,  look up Why Forex Trade Is So popular.  Next,if you want to give your trading skills an edge by relying on pure price action trading/analysis,  instead of fancy forex robots,  get started with What is Price Action Trading?    And to be able to analyze/trade  with price action data, You Need To Know Ten of These Candlestick Patterns.  If you can’t interprete what your candlesticks are telling you, you cannot trade  with price action data.

 

Well, that’s a wrap for “How to Spot High Probability Trades”  You can definitely make serious cash with high probability trades. You only need to trade once a  month and watch the pips  work their magic for you for several weeks running into months.  You can only make the mulla if your trade entry has a high chance of  raking in the profits. Trade on a whim,and you’ll get all your ten fingers burnt. Till next time, take care.

 

Looking to open a forex trading account?

Sign Up with EasyMarkets and Get a Free eBook – The Beginners Guide to Forex Trading

 

Advertisements

20 thoughts on “How To Spot High Probability Trades

  1. Pingback: How To Ace Price Action Trading | Forex Filli

  2. Pingback: Trade The False Break | Forex Filli

  3. Pingback: Trading The Bull Trap | Forex Filli

  4. Pingback: Let’s Trade the Bear Trap | Forex Filli

  5. Pingback: Trading Forex Chart Patterns Part I | Forex Filli

  6. Pingback: Trading Chart Patterns Part II | Forex Filli

  7. Pingback: Drawing and Trading Trend Lines | Forex Filli

  8. Pingback: Forex Trading Basics – Top To Bottom Part I | Forex Filli

  9. Pingback: Forex Trading Basics – Top to Bottom Part II | Forex Filli

  10. Pingback: You Need To Sharpen Your Trading Edge – Forex Filli

  11. Pingback: Find Enter,Manage – Forex Filli

  12. Pingback: We’re Going To Talk Channels – Forex Filli

  13. Pingback: Let’s Trade Flags – Forex Filli

  14. Pingback: We’re Going to Engulf Some Candles…. – Forex Filli

  15. Pingback: We’re Trading Pin Bar/Inside Bar Combination – Forex Filli

  16. Pingback: Trading The Pull Back – Forex Filli

  17. Pingback: Price Confirmation Signals: How To Weed the Chaff From The Good – Forex Filli

  18. Pingback: Playing With Pivots – Forex Filli

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s