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.
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
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.
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, here is what you need to do . First, look up Why Forex Trade Is So Popular. Next, you learn the fundamentals of forex trading by reading Forex Trading Basics – Top To Bottom Part I and Forex Trading Basics – Top to Bottom Part II .Next, you need to learn how to read candlestick patterns. They are the main feature of price action analysis And you need to know what these patterns are telling you. To be able to do that read the following on Fundamentals of Reading Candlestick Patterns, Single Candlestick Patterns, Dual Candlestick Patterns, and Triple Candlestick Patterns . Also You Need To Know Ten Of These Candlestick Patterns . And finally If you want to give your trading skills an edge by relying on pure price action trading/analysis, instead of fancy forex robots and fancy indicators, get started with What is Price Action Trading?
Looking to get a leg up on price action analysis,?you need to learn How to Identify Support and Resistance Levels. And if you want to learn how to interpret trading zones, read up on Identifying Dynamic Support and Resistance Levels. Finally you should know How To Read Candlestick Patterns using Support and Resistance Levels.
However, if you only want to trade once a month and watch your entry rack up huge profits over a stretch of several weeks, consult How to Spot High Probability Trades. And if you are still not sure about price action trading, find out Why Price Action Trading Still Rocks . Dont let me stop you from reading the other posts as well. But the suggested posts above are the most important posts to get you started.
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.
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P.S. If you want to know everything there is to know about price action trading Download for free The Ultimate Guide To Price Action Trading by Rayner Teo .This brilliant ebook will change your life as a trader. It sure did mine. And if you want a place to put your price action trading strategies into practice(Including High Probability Trades), and get a simulated feel of live forex trading conditions before trading live, open a free demo trading account with Easymarkets . And if you believe you are ready to trade live on the forex markets, open a forex trading account with EasyMarkets and get a free forex trading ebook