Suppose that for a given setup, price hits target before it reaches invalidation 70% of the time. Great, right? But getting filled is not guaranteed.
The more right you are about your trade setup, the less likely you are to get filled
By extension, getting filled actually lowers the Bayesian probability that you are right
Should I sacrifice some RRR to get filled more often?
The eternal dilemma of contrarian trading
Suppose that for a given setup, price hits target before it reaches invalidation 70% of the time. Great, right? But getting filled is not guaranteed.
Scenario 2: If only 40 out of 100 limits get filled, expected hit rate is 25%
Both scenarios have 30 losses in expectation, but the hit rate in the first is >2x better simply because more trades were taken
EV = hitrate * avg_win_R + (1-hitrate) * avg_loss_R
So we want argmax(EV), and we can compute this by seeing how hitrate and avg_win_R affect the EV of the setup.
Here's a real example where I completed this optimization.
- the average win R tends to increase ("W:PR")
- the number of losses ("L") stays constant at 31
- but the number of trades taken decreases ("#")
- so the hit rate decreases, from a max of 67.7% to a min of 11.4%.
- Understand the tradeoff between RRR and hit rate. I talked about limit orders in this thread but a similar relationship applies to market entries too
- There are no easy answers here. Only the prospect of hard work collecting good data and learning from it.
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@Captain_Kole1 @melodyofrhythm @ape_rture @realadamli @7ommyZero @voicelessFvoice
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🔸 50 ema on 3 min timeframe
🔸 Supertrend 10 , 3
🔸 Chart : Banknifty , Nifty Futures as we backtested on futures
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These setups I found from the following 4 accounts:
1. @Pathik_Trader
2. @sourabhsiso19
3. @ITRADE191
4. @DillikiBiili
Share for the benefit of everyone.
Here are the setups from @Pathik_Trader Sir first.
1. Open Drive (Intraday Setup explained)
#OpenDrive#intradaySetup
— Pathik (@Pathik_Trader) April 16, 2019
Sharing one high probability trending setup for intraday.
Few conditions needs to be met
1. Opening should be above/below previous day high/low for buy/sell setup.
2. Open=low (for buy)
Open=high (for sell)
(1/n)
Bactesting results of Open Drive
Already explained strategy of #opendrive
— Pathik (@Pathik_Trader) May 27, 2020
Backtested results in 30 stocks and nifty, banknifty.
Success ratio : approx 40-45%
RR average 1:2
Entry as per strategy
Stoploss = Open level
Exit 3:15 PM Or SL
39 months 14 months -ve, 25 +ve
Yearly all 4 years +ve performance. pic.twitter.com/nGqhzMKGVy
2. Two Price Action setups to get good long side trade for intraday.
1. PDC Acts as Support
2. PDH Acts as
So today we will discuss two more price action setups to get good long side trade for intraday.
— Pathik (@Pathik_Trader) June 20, 2020
1. PDC Acts as Support
2. PDH Acts as Support
Example of PDC/PDH Setup given
#nifty
— Pathik (@Pathik_Trader) June 23, 2020
This is how it created long setup by taking support at PDC.
hopefully shared setup on last weekend helped. pic.twitter.com/2mduSUpMn5