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IMHO the most important post in this thread , actually vital , is post No.28.


As I was saying to Barney that this thread was leading to the Bottom Line -- and that  is that the most important thing  / the only thing , that brings around long term profits is your approach to STOPS.


After all T/A , F/A , Gann , Elliot or any combination isn't rocket science , these are mearly tools that we use initially, after a while these drop to the wayside and U can just look at a chart with its Trend Lines, and interpret it , all the other stuff is just making it a bit more comfortable.



Any trading stock , as far as the trader is concernered can only move in one of two directions , if its consolidating sideways , then at the moment it's not tradeable --- so if you mearly tossed a coin you have 50% chance of being right , all any analyst can do is throw the odds your way , because U already have a two horse race.



I admit that under classic pattern rules LHG has not formed a perfect triangle (probably more a pitchfork) but what the heck -- to me it's close enough to an ascending triangle which should throw the edge my way , if I was only to trade stocks that fitted the classic descriptions down to a T , I'd be waiting forever, another excuse to procrastinate.


Far more important is the EXIT and about the only time I use any indicators  in a Trend Trade.


From the LHG example ( as with any triangle) the Inital STOP is the Target Reversed , hence (baring a sudden price move) the Loss or Bet is 50/50.


The Actual position size I initially took with LHG was 870 shares * $2.76 = $2400 , The relastic Target is $2.99 =$2600 = profit $200.

The inital rising STOP at $2.56 = $2227 =  loss/bet $173

It is the $173 that is at risk not the $2400 -- Profit on turnover is calcualated on the $173 --- the $2400 is mearly the position size.


So initally as long as STOPS are applied I'm making a $173 bet for a $200 profit --- If the STOP is lowered , then the BET size must increase BUT the PROFIT still stays static at $200.


What this is leading to is ODDS and overlay betting :

If I have a selection method that generates a 50% Strike Rate , which picking any old  stock at random is going to produce long term , and I can consistently BET  $173 for a $200 profit in the long run I must come out ahead -- but if I'm betting $300 for a $200 profit in the long run I must lose --- this is one of the golden rules of punting.


Try Bollinger Bands at 20*2 on a 5 min chart ,  -- you'll see exacatly what I'm talking about with breaks outside the bands --- I use this method consistently during the day with trading stocks : in and out / in and out



Cheers


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