Predicting the Market with 80% Confidence?

Can financial markets be predicted with an 80 confidence rate?

The amount of cash produced in a trading environment is a function of the hit rate achieved and the risk to reward ratio. In a batch of 10 trades with a hit rate of 50% and a risk to reward ratio of 2:1 the trader would make 0.50c profit per Rand risked. This is a sure way to making lots of money, supposing that the trader can stick to the system through the long runs of bad trades.

It’s a mathematical fact that with a 50/50 system there are 3 bad trades every 8 trades taken. Four bad trades every sixteen. Can you handle a run of 4 bad trades?How will you feel after 4 bad trades in sequence? Will you be able to execute the next without hesitation?

Although a high hit rate is Not necessary to make money it’s normally necessary to allow the trader to play the game of trading emotionally. Let me explain. In a 50/50 system four bad trades come up regularly every 16 trades. In a 66/33 system four bad trades happen every 81 trades. In an 80/20 system four bad trades take place every 625 trades. Most of us could handle a run of four every 625 trades but every 16?

How can we get our hit rate up to 80%? Firstly if we wish to trade with a high hit rate then it’s important to realize that we won’t be trading every move of he market. I always say in my seminars that it’s like only going out with girls that look like Halle Berry; you don’t do that much dating.

Secondly we need to look at technical measures of the market which are unconnected mathematically. For example a candle pattern which occurs over 3 days is unconnected to an ascending triangle which forms over several weeks. When both occur simultaneously our prediction of the future goes up significantly in probability.

In a seminar lasting from 0900 to 1400 I have put together many high probability trading setups. The seminar is aimed at those people (most of us) who need a high hit rate from their trading to make the game of trading stocks enjoyable. The latter are prepared to sacrifice many of the trades which are marginal and wait for the pearls of opportunity to come along.

Welcome to 2009! Come back to the Planet cos we have some serious work to do this year!

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