Forex prediction % vs Forex risk/reward

[Morpheus]

Some say that this is the holy grail. We all know how to set stop losses and take profits. What separates the men from the boys is the ability to make acceptable predictions on future price. I was thinking about this tonight after getting my ass kicked on eurusd.

You will be a winner at forex if your forex prediction ratio is greater than your risk/reward ratio.

Lets say I set a stop loss at 20 pips and a take profit at 10 pips. Where ever I decide to make the order, I would need to be correct more than 66 % of the time in order to make a profit on this. I lose 20 pips when I'm wrong and win 10 pips when I'm right. I need to win 2 times for every one loss. Thus the 66 % + win ratio. Or 2/3 = .66666 so I'm hoping that my prediction ratio will be .66666 or more. My risk reward ratio is .666666.

Just wondered if anyone had anything to add on improving prediction ratio. Obviously, if you are planning on buying, the lower the price, the better your prediction ratio will be.....duh, right. It's almost a war against time because how long can you wait or how long do you have to wait to make the trade. I'm just trying to think in these terms. Lets say I'm a scalper. If I set a 10 pip stop loss and a 15 pip take profit. I would need to have a prediction ratio of .4 or 40 % or more. I'd need to win 2 times for every 3 losses or win 2 out of 5 times. And my risk reward is .40.

I just think that is probably going to be the only long term way that I'll beat forex. You guys have any suggestions? Are you doing it this way? How do you eventually decide to buy or sell?

These ideas are also used in poker for bluffing and stuff.

[Blooey]

Originally Posted by Morpheus

Some say that this is the holy grail. We all know how to set stop losses and take profits. What separates the men from the boys is the ability to make acceptable predictions on future price. I was thinking about this tonight after getting my ass kicked on eurusd.

You will be a winner at forex if your forex prediction ratio is greater than your risk/reward ratio.

Lets say I set a stop loss at 20 pips and a take profit at 10 pips. Where ever I decide to make the order, I would need to be correct more than 66 % of the time in order to make a profit on this. I lose 20 pips when I'm wrong and win 10 pips when I'm right. I need to win 2 times for every one loss. Thus the 66 % + win ratio. Or 2/3 = .66666 so I'm hoping that my prediction ratio will be .66666 or more. My risk reward ratio is .666666.

Just wondered if anyone had anything to add on improving prediction ratio. Obviously, if you are planning on buying, the lower the price, the better your prediction ratio will be.....duh, right. It's almost a war against time because how long can you wait or how long do you have to wait to make the trade. I'm just trying to think in these terms. Lets say I'm a scalper. If I set a 10 pip stop loss and a 15 pip take profit. I would need to have a prediction ratio of .4 or 40 % or more. I'd need to win 2 times for every 3 losses or win 2 out of 5 times. And my risk reward is .40.

I just think that is probably going to be the only long term way that I'll beat forex. You guys have any suggestions? Are you doing it this way? How do you eventually decide to buy or sell?

These ideas are also used in poker for bluffing and stuff.

I think there are some hidden Satanic messages in this post. Morph, are you a Satanist?

[Morpheus]

hahaha....you are from Japan. I love japan. Are you japanese ?

[Jonathan]

Originally Posted by Morpheus

hahaha....you are from Japan. I love japan. Are you japanese ?

Notice how the suspect dodges the question...

[techno791]

You know what throws these percentages off? Closing a trade early.
At this point I'm not sure if this is a good or bad thing to calculate, though it couldn't hurt. But unlike playing slots or roulette, I can close that trade at 6 pips gain, or 3 pips loss, and totally mess the system up.
Sometimes you notice things.....brb

[T-Raid101]

Originally Posted by techno791

You know what throws these percentages off? Closing a trade early.
At this point I'm not sure if this is a good or bad thing to calculate, though it couldn't hurt. But unlike playing slots or roulette, I can close that trade at 6 pips gain, or 3 pips loss, and totally mess the system up.
Sometimes you notice things.....brb

If you exit a trade early, it's most likely due to the fact that it either turned against you earlier than you initially anticipated, or it went bad from the start. Both those scenarios fall into the risk category and all you're doing by stopping the loss early is decreasing your risk/reward ratio. I dont know what the system would do as far as planning trades, but it seems like a good statistic to keep track of. It can definitly show you the levels of risk you take

[techno791]

back....so yes, you'd probably only be exiting a trade if it was going against you. If it was going good, why leave it? Unless you were scalping, and only trade when you can watch the action, and had to leave.
Sometimes some trades move so slowly and take so long, that as it's moving, all the conditions are changing. Maybe you're getting close to news. Maybe you only trade asian, and it's a dead session, compared to usual, and need to close out before London, or whatever.
Just trying to say, the nifty thing about Forex is that just because you put $10 on Red, there's nothing that says you have to wait to a pre-determined time to close out.
How many times have we all traded, and all of a sudden it didn't look right, and we close out at the top?