Mowery - not sure you understand what risk to reward means. In the example of 1 to 3, you are risking 1 point to make 3 points. This does NOT mean you are right 33% of the time, that is a completely separate function. I prefer to trade on 1 to 2 at the minimum, which means I am willing to risk 1 point on the ES in order to make 2 points and my win % fluctuates between 60-85%. The win % is a completely separate calculation from risk-to-reward.
Exactly, the factor of a target/stop of 5 does not mean the target will be hit only 20% of the time. That would be too easy. That would mean that a target of +1 tick would be hit 10 times more often than a target at +10 ticks. This is not true. Both chances depend on the probability distribution, which has a log-normal shape where the width of the shape is determined by the volatility of the stock. The chances of +100 are far less than 1/100th of the chances of +1. Ursa..
LOL, price can stay the same, it does not move sideways. otherwise one would need a z axis to plot this action.
You can never know what will happen next. The outcome of each trade requires participation of other traders, sometimes they are going to be there, sometimes they wont - every moment is unique. In the long run you can have an edge with an expected outcome of over 50 %, but you can never know if the next trade or the ten next trades will end in your favour. /
How is trading then, any different than a refined version of gambling? Afterall, both seem to be numbers' games based on probabilities. By "refined" I mean ppl have actually come up with indicators, studies and analysis of the possible outcomes in a trade. The study of gambling hasn't actually reached such levels- or atleast, not that I know of..
chugani - many people refer to active trading as a form of 'gambling'. You are right, you are placing monetary 'bets' based on probabilities in its simplest form. Not sure many traders want to be referred to as gamblers though.
To all the traders I know who make good money, this is exactly what trading is, and nothing more. Find some kind of positive expectancy and execute like a machine.