thanks -- I have been wondering about Price Action trading, this helps fill in a big question I had. I am generally on the side of the previous comment about "high probability" without actual counting. But in considering the opposing side, I've read about halfway through Al Brooks book, and have noticed thinking to myself "wow, that's like what I see all the time". I like the screen shots, especially the 2-parts -- one at the set up, the next at how it turned out.
My favorite quote on the "high probability" matter: "It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." George Soros
Stops should be placed where the market can't take you out of good trades. As a result of placing wider stops your hit rate increases.If you select highest probability entries and trades , your hit rate will be 80 % plus. If you select a any reasonable trending strategy ,with a stop loss of 40 pips and target of 26 pips your hit rate will be around 65 % , use a stop loss of 20 and target of 22 your hit rate will around 50 %.The profit comes from picking the highest probability entries by increasing your hit rate to 80%. Think what happens if you put your stop down to 6 or increase to 100 .I have already showed a few trades where small stops actually cost hundreds of pips when getting taken out of great winners of 50 to 100 pips. Let us say you do a thousand trades , 800*26 =20,800 profit 200*40 = 8,000 loss net profit of 12,800 pips per year * futures account $10 pp = $128,000 Drawdown 600 pips * $10 = $6,000 No good trading 10 cents a pip and making $1,000 a year at a bucket shop like Oanda , and telling mothers how to suck eggs.
This is how Dr Cornelius trade low risk breakouts. Dr Cornelius look at correlated markets like euro/usd to see if it is also strong.If trading Dax watch for other indices and euro /usd correlation.This is high probability price action confirmation.
Now all those uptrend consolidation entries , 7 trades on bottom of consolidation using high probability price action.
Falling wedge in a uptrend is a bullish pattern.Enter when price rises above support for confirmed support.
Rising wedge in a falling market is a low risk high reward opportunity. http://caripips.blogspot.com/2008/08/how-to-trade-rising-wedge.html
I have run several back tests on intra day trading covering 10 years ,the entries and exits are very important along with knowledge of other factors described earlier. Stops of 20 pips and 22 profit target achieved 50 % hit rate , stop of 40 with 20 target achieved 65 % hit rate, stops of 100 and target of 20 pips achieved a 75 % hit rate.It was using same criteria except stops on all different tests. You can guess what a 6 pip stop trading noise ,would do to most traders including the mindset aspect. I use these wide stops of 100 and use context ,higher probability trading set ups using confluence ,momentum ,support and resistance to achieve 85 % plus success rate.