This has been discussed before in a slightly different form but that's ok. Let's suppose the market is random, ie. the chances of it going up 1 point at any given moment are 1/2, the chances of going down 1 point are 1/2. Let's also suppose that the market moves in 1 point increments up and down. Now what happens if we enter and set a 1 point stop loss and a 3 point target. What is our mathematical expectation? This question mathematically is not that simple, or I'd solve it Basically we have to look at all the possible market steps: For example, lets say we're long. Market goes up with prob. of 1/2, then it again has two options, up or down, let's say it goes up again, we're up two points, but then it might go down again going to +1, then it might go to +2 again then +1, +0 and -1 stopping us out. And at every 'junction' there's two events with the 1/2 probabilities. The basic question is what is the probability of us getting to +3 without getting to -1 first? What is the probability of getting to -1 without getting to +3 first? Not obvious at all. But I'm positive this can be mathematically solved, as I've seen a similar problem solved. That problem involved a drunkard standing one step away from the cliff. The Prob of a step toward the cliff is 1/3, the Prob of step away from the cliff is 2/3. What is the probability of the drunkard falling off the cliff? Believe me this is a complicated problem. But I'm sure there's people on ET qualified to solve it. P.S. If there's even the slightest auto-correlation between moves, ie. it's more probable to go up if we went up on the last movement, vica versa for down, then any moron can get a positive expectation no matter what setup he uses.