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

I haven't seen this tradeoff articulated on CT. Allow me to explore this, starting with an example of trading with limit orders:

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 1: If 100 out of 100 limits get filled, expected hit rate is 70%
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
Then we have RRR. Setting entries closer to invalidation increases RRR but decreases the probability of getting filled, since entries are further away from the current price. And as above, getting filled less often results in a lower hit rate. So RRR trades off against hit rate.
Where to place the limit orders though? The optimal place to enter maximizes the EV of the setup, where

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.
The optimum lies where the marginal +EV benefit from increased RRR is perfectly offset by the -EV cost of decreased hit rate. This is like optimizing output with MR=MC in economics - we want to find the best combination of two related variables. There may be multiple local optima
Of course, actually determining the optimal place to enter requires good data and quantitative analysis. It doesn't have to be in a spreadsheet; for instance it could be based on past charts logged in a journal.

Here's a real example where I completed this optimization.
This shows the tradeoff. As "Entry" gets closer to "Inval",
- 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%.
The highest EV in terms of R ("EVR") of 0.72R occurs not at the extremes where RRR or hitrate are maxed out but somewhere in the middle. It turns out that the extremes where RRR or hitrate were maxed out actually exhibited the lowest expected values.
In conclusion:
- 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.

💪
Tagging some people who I think would appreciate this:
@Captain_Kole1 @melodyofrhythm @ape_rture @realadamli @7ommyZero @voicelessFvoice

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The winners 👇

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महाभारत की कहानी कौन नहीं जानता।लेकिन क्या आपको पता है कि महाभारत के ज्यादातर पात्र किसी न किसी श्राप में फंसे थे।अगर ये श्राप न होते तो कदाचित महाभारत की कहानी कुछ और होती।हिन्दु पौराणिक ग्रंथों में विभिन्न श्रापों का वर्णन मिलता है व हर श्राप के पीछे कोई कहानी अवश्य होती है।


आइए आज जानते हैं महाभारत कथा में वर्णित कुछ श्रापों के बारे में।

1) राजा पाण्डु को ऋषि किन्दम का श्राप

एकबार महाराज पाण्डु शिकार खेलने वन गए।झाडियों के पीछे कुछ हिल रहा था। मृग है सोचकर राजा ने बाण चलाया जो जाकर ऋषि किन्दम और उनकी पत्नी को लगा।वे दोनो रति-क्रीड़ा में लिप्त थे।

जब राजा ने उन्हें देखा तो बहुत दुखी हुए कि ये मुझसे क्या पाप हो गया।बहुत क्षमा याचना के बाद भी किन्दम ऋषि ने पाण्डु को श्राप दे दिया कि जब भी वो किसी स्त्री को काम भावना से स्पर्श करेंगे उसी क्षण उनकी मृत्यु हो जाएगी।पश्चाताप करने, वे सिंहासन पे अन्धे राजा धृतराष्ट्र को बैठाकर...


..स्वयं अपनी रानियों कुंती व माद्री के साथ वन चले गए।पांडवों का जन्म भी कुंती को ऋषि दुर्वासा द्वारा दिए गए मंत्र से हुआ था जिसमे किसी भी देव का स्मरण कर उस देव से कुंती,पुत्र प्राप्त कर सकती थी।एक बार माद्री पे मोहित हो जब पांडु ने उसे स्पर्श किया,उसी क्षण पांडु की मृत्यु होगयी।


2) उर्वशी का अर्जुन को श्राप

महाभारत युद्ध से पहले जब अर्जुन दिव्यास्त्र प्राप्त करने स्वर्ग गए तो वहां उर्वशी नाम की अप्सरा उन पर मोहित हो गयी। अर्जुन ने जब उन्हें अपनी माता के समान बताया तो यह सुनकर उर्वशी क्रोधित हो गयी और अर्जुन को श्राप दे डाला कि तुम नपुंसक की भांति...