Some key takeaways -Just because the win rate is higher waiting for confirmation, that does not mean the EV is higher. -Many factors can influence EV intra-trade like buyers/sellers in the tape, news, time of day, etc. Will need to rewatch this to comb back though. A lot of value here. Enjoyed this key knowledge from inside SMB, thanks Lance!
When I first watched this video a month ago, the last part of the video was true for me - none of it made any sense to me. But a month later, after a lot of studying and sim trading, it makes a ton of sense. Thanks, Lance and SMB!
In my view, this is by far the best video you created so far! Nice one timeframing lower on the reversal example. The exactness in trading kills, that was my favorite topic of the video, hence trading can not be learned in a few weeks. The markets are constantly changing and even if the setup is nice and clean the trade can still be a loser. Now adding assessing as you showed from bar to bar is a huge leap forward. Understanding this takes years and executing it even longer. Thank you for sharing this great content!!!
Excellent video. Especially handy in avoiding large losses (which always start off as shrunk gains or small losses and show telltale signs of decreasing EV)
Great view point, I loved the pocket aces to the flop explanation, and how crazy it would be to run them to the river if the flop delivers a pocket aces killer. I've always loved poker, and those percentages are always on the mind in any game, however I've never implemented this into any of my trades. Many thanks 👌 envious of all the guys at SMB, such amazing coaches and mentors and traders 👏
Thank you Lance. Your a stud! I watched this once yesterday and twice in a row today. I recommend everyone watch this video twice in a row if possible. This page is so strong and the content so good I feel like I’m cheating for getting this all for free. Thank you Bella. ❤️❤️😊
I remember reading in The Playbook Shark mentioned related concept of piecing out your stops for individual entries instead of selling everything at single price.
Omg, this is way over my skill level, but the main concept makes so much sense to me. I have struggles with turning a winning trade into a big looser and this lesson puts some of my mistakes in those trades into very clear perspective. Thanks so much for a great nugget of info that I know will help me a bunch now and more as I develop as a trader.
I agree a way of thinking about odds as a changing beast; bar by bar is perfect. And the clip of poker player playing AA to the river was also perfect. Great work !
Great video. I'd love to hear your thoughs on why market dynamics are so that great entries usually don't last more than a few minutes or seconds and why retest on great entries are unlikely.
Yes makes total sense. I should also add when you get in at the beginning of Bar A sometimes you will be waiting for bullish or bearish activity to come in more prominently which can be very psychologically stressful for traders that typically want some kind of confirmation prior to entry. Getting in at bar A typically is the bottom of the reversal consolidation phase for me. It can be annoying but you learn to sit in trades better. You also learn to spot signs of weakness or strength during that phase which helps for early confirmation.
I love this video. I've been working on this recently as far as my starter position then adding as the position starts to work for me and getting full size if I get a pullback close to my entry with the stop above my starter entry candle.
This video is lovely Lance, and differs widely from other traders' views, even traders at SMB who have made videos wherin they said to not move your SL or wait for a share to stay above or below a certain level before entering.
Awesome, awesome, awesome video. Win-rate does not always mean profitability. I will be doing a ton of research on EV and how it marries to R/R for my future plays. I am considering adding ES scalps to my strategy, extremely tight stops. It would be impractical to attempt to calculate this in real time, but as back-test I can identify the nuance in real time and use that for entry/exit on these scalps, and ensure that I'm minimizing my risk. Again, amazing video. So many new traders have taken this "diamond hand" approach, and it's honestly decreasing their leverage on a trade by such a high degree.
Good explanation of a topic. I have not seen better. The 'setup' is then dynamic, a function of time which alters the initial probability. Such as, the initial mean reversal shown could transform into a flag, given the right conditions.
thanks to Al Brooks I knew this concept of risk x reward x probability, he talks a lot about it, I believe somehow this relates with personality, I'm more of the type that like to enter after confirmation even if the EV is not optimal, having a higher winrate and the wind on my back eases the mind and make me more likely to follow my strategy to the crisp, this also apply to having different ways to manage the trade, I tried to be maleable but found out that a fixed way to get out makes me more reliable, can be because I'm in the early years, can be personality, idk anyway great video as always, really food for thought, Lance is the man
After two years of continuous learning, I would say this video is the closest thing to handing out cash in the street... superb ideas, well-explained Lance!!
Brillant skill building. I wish I would have watched this video way earlier and avoid pain due to poor execution by entering trades too close to target for example. Risk management and execution are key to success. .
thanks lance! - expected value seems to be negatively correlated with win rate. - look for break of prior bar low. trailing stop: high of prior bar - risk, reward relatioinship matters - risking previous bar high when shorting - you should include nuances and not have your system so binary unless your data supports it
Great video thanks! I"m curious if you would recommend or have ever used any formal qualitative analysis to look back at the data? (i.e. something like content analysis, as you mentioned it would be very difficult to be running formal quantitative analysis when there are so many moving factors not limited to price and volume but with things like news or what sector an equity is in etc.) Would love to chat about this
Re the SMB trader who asked about sourcing the probabilities, and back-testing. There can be an interesting dichotomy between traders who rely on data/models/algorithms etc (where a lot of the hard work is outside of trading hours, development and back-testing) and discretionary traders (where a lot of the hard work is in real-time trading). Algorithmic design is often based on a classification problem (true/false, buy sell etc, or even discrete position sizing). But that is typically ONLY getting at the 'probability' part of the EV logic you've highlighted (even if the outcome is based on a stop-loss/profit-take). Often these sorts of models will adjust their sizing BASED ON the probabilities (and definitionally, this might mean larger sizing on higher probability outcomes, which can be directly counterproductive as you highlighted in the video). The lesson (if that person is an algo developer) is to rethink from the ground-up the framework their models are built around (which is hard intellectual work, an investment in model development, and not necessarily immediately profitable). For more discretionary traders (who still, obviously, have systems and robust logic) the freedom can allow an easier and more intuitive adoption of the EV framework.
Amazing content, I like how this technique can remind you to think in levels and where the market could be going and to have a clear mind of what’s going on now.
Inn Options trading the reward/risk is pretty large so you can nail very good trades with Binay outcome .. thanks for the video.. I have lot of respect for you ..
I have been subscriber for a couple years. I know the different traders use different indicators and would really like to know what the consensus with the traders as to specifically why that use the indicators and why. Thank you for intertaining my question, Best Doug
Good video. It would make sense if someone were to hold the correct price action stop on all the entries. I scalp and ES and use a fixed number of ticks stop depending on the volatility. Its just another way of thinking of visualizing the risk vs. reward on each entry.
Yeah I do the same thing. Whenever I add on if I can't take an equal amount of risk OFF my last contract I'm not adding another one. The problem know when the trade works they should be adding, but then if it starts to turn around, they ride all their add-ons back down to the original entry and of course, now Youve taken 2,3 times your loss and your afraid to add on cuz it doesn't work. But you just did it wrong
Great comparison to betting the same with pockets aces vs any other hand. So many people just don't do the work to really figure a system that allows them to CLEARLY identify pockets aces type edge. They often just believe it or it looks like or feels like an A+ play and when they lose they either have zero confidence and stop and not allow the edge to work or they keep their size big not realizing they don't have an edge or worse revenge trade without doing more work to first understand what happened.
Loved the video totally get. I struggle all the time depending how the circumstances of the trade are playing out if it’s best to take the trade off, start taking partials etc. I have been working on all of this including when to take full size on A+ Trades when the decision has to be made very quickly or the probabilities become less in your favor if that makes sense.
Blackjack would be a better analogy than poker. In BJ 67% of the hands are losing hands, so you bet minimum amounts on those hands. When the odds of winning hands come, bet size goes up. In BJ it's easier to learn what the good hands are than it is in trading.
really valuable video. I got a lot of out from this video. thank for such a great video and I think the poker game example is very accurate. I think when the data is changing we have to make the decision accordingly. btw, I downloaded it already, so whatever it happenned to youtube, this channel or simple you just don't wanna share it anymore. I have it on my laptop. :)
Not gunna lie, and I’ll only admit to watching this 10 times so far but as a determined newly addicted trader I’ve found a lot of value in this lesson which I was able to translate and compare this relatable style of trading to my own style I’ve been trying to develop . Just wanted to say thank you SMB for all you and your elite crew do !👍👍👍👍👍
There's a sweetspot of risk within each setup: Too early, and the probabilty of the trade not going into your intented direction is high. Too late, the risk/reward ratio is too bad. How to know where this sweetspot is: experience! And always manage your trades, every bar is new info (like in Poker).
if you look for what Al Brooks say about the "trader's equation" and the differences of what (his concepts of) swings and scalps are, you will find same/more of this topic
I have a trading system that defines the entry stop and target before the market opens. As hard as I try to use my discretion to beat the system I find that I constantly do worse than the system. Lesson learned. I try not to use my discretion at all once the trade has been defined. This goes against what you teach here. I hope with time I can incorporate more discretion to try and improve my system. For now I just trade like a computer and track what I would have done if I were to use my discretion to manage the trade. Like getting out early because a long trade is looking bearish. I almost always end up getting out of the trade too early. I guess the robustness of my system overwhelms most of the factors that come in to play later like a big buyer on the tape or bearish correlations.
Thus is true for me also. I have set chart setups that must be found but once found and correct offer the sane odds each time. For me I changed my mindset to rather than tying to avoid risk with knowing I have great strategy so shouldn't worry, I changed it too sitting on the side in my mind where i allow slightly more risk ie sitting in trade past the impulse price action to get out. Working well so I'd say do it like this as you are rather than discretion... if the system is good enough to not worry about tick by tick and just expect the target area.
Lance, If you're currently trader B who waits for confirmation but you're working on trying to become trader A are you saying to keep your max risk the same even though you are getting in before confirmation so your EV is higher? Or are you saying lower your max risk when getting in before confirmation but shooting for the same EV as you typically would as trader B?
Thanks for the video. I do have a recommendation for a new video topic. It would probably be pretty difficult. Can you do one of when to cut your loss or how to go about it for specific set ups. Ex cutting as soon as it test risk vs letting it test a few times vs letting it break and seeing if it reclaims. Just a thought. Thanks!
Definitely difficult since their risk will be different from yours. Your best bet is to stick to a plan based off your port size. Then review your trades after and see how you can do better next time. I personally let the chart stop me out instead of the amount or %.
PLEASE PLEASE PLEASE ask Lance to make a video of his setups. So he told us about his Mean Reversion setup. And I also saw reference to a Channel Trade setup. Please ask him to grade the setup as well. And tell us his A+ setups.
This makes a lot of sense to me. If the price is a random walk, then no matter how smart you are you cannot have an edge. By definition. So our job as traders is to identify when we think price will not be a random walk for the near term. But it is not enough to make this assessment only prior to the trade. You have to keep making this assessment while you are in the trade and get out once you think the price has returned to a random walk or worse. So entry with an attached bracket order to take profits or losses is sub-optimal.
I understand that the value is to reassess your probability throughout the trade, however it would be hard to stick to these calculations when they’re all arbitrary. It’s not really that different than making sure you have a good risk/reward ratio and using intuition to close or keep the position open. After all the initial probabilities are intuitive.
The intrinsic value of the trade is the same no matter weather you took it at bar A or bar B. There was just further confirmation and less stress at bar B. Ultimately if your strategy says take it at bar A and you’ve backtested that than you have no need to overthink like this.
This reminds me of something I heard Tom Dante say, that Reward/Risk is bs. Not that you shouldn't have it in your plan, but after you've entered the initial R/R goes right out the window. I.e. Enter w/a 3/1 R/R, it goes up an R and now you have 2/2; Goes up another R and you're now risking 3 looking for 1. It's why I reduce the position (take some profit) on the way up on scalps and gradually raise stops on swings; Trying to keep the R/R in my favor (especially in 2022). As always, thanks for the video.
I have extensively backtested/journaled close to 700 of my trades. I have backtested all of these trades with all or nothing strategies as well as scale out strategies and I've found that the all or nothing is both more consistently profitable and more net profitable than any scale-out strategies I have found.
It probably depends on your trading style. For my personal method of trading all or nothing is best, but I have backtested some strategies where scaling out is more consistently profitable. I think it is helpful to idenitify key levels of supply/demand including moving averages or bollinger bands where you should scale out. But my method of trading relies on trading large gaps to the next supply/demand, so it is a mistake to take profit before those levels are hit.
When you are up to bat, do you decide whether or not and how you are going to swing before the ball is pitched? Or do you wait until is it thrown and take that new info into consideration before making your swing (or not and how) decision?
I'd say before it is thrown you should have a 90% idea of what you are going to do. The last 10% is watching and aiming to this particular pitch. How I treat it personally
I like the topic but dont like how the risk is being left the same from the initial idea. In all examples after first column ev id never use the original stop loss for those entries instead lower it substantially. If the trade is going to target its going to go to target and if not then i wanna get out quick and not lose more than needed waiting for the original stop loss.
But then you have three different trades altogether and the thesis is different for each one. Your initial thesis is “this won’t break above/below that swing high/low” but by the third trade it’s something along the lines of “this won’t retrace to the lower timeframe pivot”, which is not a good trade considering there’s a huge chance it does indeed even wick beneath the pivot.
@@thrls No the thesis is the same you have a expected move to a target. Why put such a huge stop if your waiting for later confirmation of this trade move?
The problem with a lot of independent traders is they do not have a setup that has a positive EV (statistical edge). It only takes one setup to make money. Master it!
Some key takeaways
-Just because the win rate is higher waiting for confirmation, that does not mean the EV is higher.
-Many factors can influence EV intra-trade like buyers/sellers in the tape, news, time of day, etc.
Will need to rewatch this to comb back though. A lot of value here. Enjoyed this key knowledge from inside SMB, thanks Lance!
When I first watched this video a month ago, the last part of the video was true for me - none of it made any sense to me. But a month later, after a lot of studying and sim trading, it makes a ton of sense. Thanks, Lance and SMB!
In my view, this is by far the best video you created so far! Nice one timeframing lower on the reversal example. The exactness in trading kills, that was my favorite topic of the video, hence trading can not be learned in a few weeks. The markets are constantly changing and even if the setup is nice and clean the trade can still be a loser. Now adding assessing as you showed from bar to bar is a huge leap forward. Understanding this takes years and executing it even longer. Thank you for sharing this great content!!!
Excellent video. Especially handy in avoiding large losses (which always start off as shrunk gains or small losses and show telltale signs of decreasing EV)
Great view point, I loved the pocket aces to the flop explanation, and how crazy it would be to run them to the river if the flop delivers a pocket aces killer. I've always loved poker, and those percentages are always on the mind in any game, however I've never implemented this into any of my trades. Many thanks 👌 envious of all the guys at SMB, such amazing coaches and mentors and traders 👏
Thank you Lance. Your a stud! I watched this once yesterday and twice in a row today. I recommend everyone watch this video twice in a row if possible. This page is so strong and the content so good I feel like I’m cheating for getting this all for free. Thank you Bella. ❤️❤️😊
I remember reading in The Playbook Shark mentioned related concept of piecing out your stops for individual entries instead of selling everything at single price.
Anyone who is trying where Expected value(EV) value comes from it's a derivative 😅, here's the math:
EV= (WinRate*Reward) + (WinRate*Risk) -Risk
Omg, this is way over my skill level, but the main concept makes so much sense to me. I have struggles with turning a winning trade into a big looser and this lesson puts some of my mistakes in those trades into very clear perspective. Thanks so much for a great nugget of info that I know will help me a bunch now and more as I develop as a trader.
I agree a way of thinking about odds as a changing beast; bar by bar is perfect. And the clip of poker player playing AA to the river was also perfect. Great work !
Great video. I'd love to hear your thoughs on why market dynamics are so that great entries usually don't last more than a few minutes or seconds and why retest on great entries are unlikely.
Yes makes total sense. I should also add when you get in at the beginning of Bar A sometimes you will be waiting for bullish or bearish activity to come in more prominently which can be very psychologically stressful for traders that typically want some kind of confirmation prior to entry. Getting in at bar A typically is the bottom of the reversal consolidation phase for me. It can be annoying but you learn to sit in trades better. You also learn to spot signs of weakness or strength during that phase which helps for early confirmation.
Wise words my freind. Happy trading 👌
I love this post. Thanks.
I love this video. I've been working on this recently as far as my starter position then adding as the position starts to work for me and getting full size if I get a pullback close to my entry with the stop above my starter entry candle.
This video is lovely Lance, and differs widely from other traders' views, even traders at SMB who have made videos wherin they said to not move your SL or wait for a share to stay above or below a certain level before entering.
In Depth video wilth a lot of good information.. must watch again !!
Great one as always. Please keep these Pearls of wisdom coming. It’s something I noticed today trading. Couldn’t be better timing. Thx!
Awesome, awesome, awesome video. Win-rate does not always mean profitability. I will be doing a ton of research on EV and how it marries to R/R for my future plays. I am considering adding ES scalps to my strategy, extremely tight stops. It would be impractical to attempt to calculate this in real time, but as back-test I can identify the nuance in real time and use that for entry/exit on these scalps, and ensure that I'm minimizing my risk.
Again, amazing video. So many new traders have taken this "diamond hand" approach, and it's honestly decreasing their leverage on a trade by such a high degree.
Good explanation of a topic. I have not seen better. The 'setup' is then dynamic, a function of time which alters the initial probability. Such as, the initial mean reversal shown could transform into a flag, given the right conditions.
Excellent video! Love both trading and poker
thanks to Al Brooks I knew this concept of risk x reward x probability, he talks a lot about it, I believe somehow this relates with personality, I'm more of the type that like to enter after confirmation even if the EV is not optimal, having a higher winrate and the wind on my back eases the mind and make me more likely to follow my strategy to the crisp, this also apply to having different ways to manage the trade, I tried to be maleable but found out that a fixed way to get out makes me more reliable, can be because I'm in the early years, can be personality, idk
anyway great video as always, really food for thought, Lance is the man
After two years of continuous learning, I would say this video is the closest thing to handing out cash in the street... superb ideas, well-explained Lance!!
I had the same thought. This video is kind of a winning blueprint for a new trader.
Great content, don't see many covering this kind high level trading skill, also seems very similar to Tom Dante's Evolving 'R' theory.
I prefer these specific lesson videos over the long trade reviews
Brillant skill building. I wish I would have watched this video way earlier and avoid pain due to poor execution by entering trades too close to target for example. Risk management and execution are key to success. .
Really loved this. Thank you!
Sounds great, never looked at trades that way before - thanks!!!
amazing video - perfect teaching style!
One of ur best vids. Top 3 if not my personal fav overall
Now finally someone that has his A+++ game on... Without the inteructions ... Thank You So Much...
Thank you guys so much great breakdown .
Only difference between poker and trading, you never wanna bluff in trading 🤣
Haha, you have a point there.
😂
Not unless you're the whale.
😂😂
HFTs do that all the time.
thanks lance!
- expected value seems to be negatively correlated with win rate.
- look for break of prior bar low. trailing stop: high of prior bar
- risk, reward relatioinship matters
- risking previous bar high when shorting
- you should include nuances and not have your system so binary unless your data supports it
Great video thanks! I"m curious if you would recommend or have ever used any formal qualitative analysis to look back at the data? (i.e. something like content analysis, as you mentioned it would be very difficult to be running formal quantitative analysis when there are so many moving factors not limited to price and volume but with things like news or what sector an equity is in etc.) Would love to chat about this
Re the SMB trader who asked about sourcing the probabilities, and back-testing. There can be an interesting dichotomy between traders who rely on data/models/algorithms etc (where a lot of the hard work is outside of trading hours, development and back-testing) and discretionary traders (where a lot of the hard work is in real-time trading).
Algorithmic design is often based on a classification problem (true/false, buy sell etc, or even discrete position sizing). But that is typically ONLY getting at the 'probability' part of the EV logic you've highlighted (even if the outcome is based on a stop-loss/profit-take). Often these sorts of models will adjust their sizing BASED ON the probabilities (and definitionally, this might mean larger sizing on higher probability outcomes, which can be directly counterproductive as you highlighted in the video). The lesson (if that person is an algo developer) is to rethink from the ground-up the framework their models are built around (which is hard intellectual work, an investment in model development, and not necessarily immediately profitable).
For more discretionary traders (who still, obviously, have systems and robust logic) the freedom can allow an easier and more intuitive adoption of the EV framework.
Thanks for your comment. It's quite insightful.
Thanks so much, Lance and SMB.
Great video thank you!
Lance is my new go to for learning. I used to watch Tim Bohen not any more.
Tanks a lot Lance!🙏
Amazing content, I like how this technique can remind you to think in levels and where the market could be going and to have a clear mind of what’s going on now.
Thank you Lance.
that was gold, thank you for sharing!
Inn Options trading the reward/risk is pretty large so you can nail very good trades with Binay outcome .. thanks for the video.. I have lot of respect for you ..
Great explanation and framework, thank you lance/smb!
I have been subscriber for a couple years. I know the different traders use different indicators and would really like to know what the consensus with the traders as to specifically why that use the indicators and why. Thank you for intertaining my question, Best Doug
Great video chief!!🔥🔥🔥
This is an awesome Vid. Thank you guys.
Great Video, Thank you
Very well and honestly described. I like the nuanced approach, a mix of science and art. Poker is a excellent analogy.
Another great video from Lance 👍
Good video. It would make sense if someone were to hold the correct price action stop on all the entries. I scalp and ES and use a fixed number of ticks stop depending on the volatility. Its just another way of thinking of visualizing the risk vs. reward on each entry.
Yeah I do the same thing. Whenever I add on if I can't take an equal amount of risk OFF my last contract I'm not adding another one.
The problem know when the trade works they should be adding, but then if it starts to turn around, they ride all their add-ons back down to the original entry and of course, now Youve taken 2,3 times your loss and your afraid to add on cuz it doesn't work. But you just did it wrong
Great comparison to betting the same with pockets aces vs any other hand. So many people just don't do the work to really figure a system that allows them to CLEARLY identify pockets aces type edge. They often just believe it or it looks like or feels like an A+ play and when they lose they either have zero confidence and stop and not allow the edge to work or they keep their size big not realizing they don't have an edge or worse revenge trade without doing more work to first understand what happened.
Nice job..very helpful..
Thanks Lance!
Thank you!
Loved the video totally get. I struggle all the time depending how the circumstances of the trade are playing out if it’s best to take the trade off, start taking partials etc. I have been working on all of this including when to take full size on A+ Trades when the decision has to be made very quickly or the probabilities become less in your favor if that makes sense.
Very helpful. Thank you.
Just love this content maybe one day Im trading with you guys!
"The worst hand in poker is the second best hand"
Enjoyed very much..
Absolutely Lance, better enter the trade at first then average up. target do not work go with the flow
OMG> he revolutionized my thinking with this!
Blackjack would be a better analogy than poker. In BJ 67% of the hands are losing hands, so you bet minimum amounts on those hands. When the odds of winning hands come, bet size goes up. In BJ it's easier to learn what the good hands are than it is in trading.
Thank you
really valuable video. I got a lot of out from this video. thank for such a great video and I think the poker game example is very accurate. I think when the data is changing we have to make the decision accordingly. btw, I downloaded it already, so whatever it happenned to youtube, this channel or simple you just don't wanna share it anymore. I have it on my laptop. :)
Big fan of you, hope I could be one of SMB traders one day
TYVM Lance.
Thank u mentor!
thank you for this ground breaking tutorial. 🇮🇳
Great explanation.
Not gunna lie, and I’ll only admit to watching this 10 times so far but as a determined newly addicted trader I’ve found a lot of value in this lesson which I was able to translate and compare this relatable style of trading to my own style I’ve been trying to develop . Just wanted to say thank you SMB for all you and your elite crew do !👍👍👍👍👍
This dude's brain thinks so fast, I watched it 20x, just so I can I soak it all in....
No break, no pause, no director's cut...just pure/unedited gold
Video gets better every time 👍
There's a sweetspot of risk within each setup:
Too early, and the probabilty of the trade not going into your intented direction is high.
Too late, the risk/reward ratio is too bad.
How to know where this sweetspot is: experience!
And always manage your trades, every bar is new info (like in Poker).
the best session!
Appreciate these topics which no one teaches
if you look for what Al Brooks say about the "trader's equation" and the differences of what (his concepts of) swings and scalps are, you will find same/more of this topic
As an expected return becomes a realized return the slope of the return flattens and hence the evolving expected return falls so you get out......
I have a trading system that defines the entry stop and target before the market opens. As hard as I try to use my discretion to beat the system I find that I constantly do worse than the system. Lesson learned. I try not to use my discretion at all once the trade has been defined. This goes against what you teach here. I hope with time I can incorporate more discretion to try and improve my system. For now I just trade like a computer and track what I would have done if I were to use my discretion to manage the trade. Like getting out early because a long trade is looking bearish. I almost always end up getting out of the trade too early. I guess the robustness of my system overwhelms most of the factors that come in to play later like a big buyer on the tape or bearish correlations.
Thus is true for me also. I have set chart setups that must be found but once found and correct offer the sane odds each time.
For me I changed my mindset to rather than tying to avoid risk with knowing I have great strategy so shouldn't worry, I changed it too sitting on the side in my mind where i allow slightly more risk ie sitting in trade past the impulse price action to get out. Working well so I'd say do it like this as you are rather than discretion... if the system is good enough to not worry about tick by tick and just expect the target area.
Lance, If you're currently trader B who waits for confirmation but you're working on trying to become trader A are you saying to keep your max risk the same even though you are getting in before confirmation so your EV is higher? Or are you saying lower your max risk when getting in before confirmation but shooting for the same EV as you typically would as trader B?
This video was outstanding.
Thanks for the video. I do have a recommendation for a new video topic. It would probably be pretty difficult. Can you do one of when to cut your loss or how to go about it for specific set ups. Ex cutting as soon as it test risk vs letting it test a few times vs letting it break and seeing if it reclaims. Just a thought. Thanks!
Definitely difficult since their risk will be different from yours. Your best bet is to stick to a plan based off your port size. Then review your trades after and see how you can do better next time. I personally let the chart stop me out instead of the amount or %.
Great video!
PLEASE PLEASE PLEASE ask Lance to make a video of his setups. So he told us about his Mean Reversion setup. And I also saw reference to a Channel Trade setup. Please ask him to grade the setup as well. And tell us his A+ setups.
This makes a lot of sense to me. If the price is a random walk, then no matter how smart you are you cannot have an edge. By definition. So our job as traders is to identify when we think price will not be a random walk for the near term. But it is not enough to make this assessment only prior to the trade. You have to keep making this assessment while you are in the trade and get out once you think the price has returned to a random walk or worse. So entry with an attached bracket order to take profits or losses is sub-optimal.
very well put. You cannot have an edge in a random walk.
I understand that the value is to reassess your probability throughout the trade, however it would be hard to stick to these calculations when they’re all arbitrary. It’s not really that different than making sure you have a good risk/reward ratio and using intuition to close or keep the position open. After all the initial probabilities are intuitive.
The intrinsic value of the trade is the same no matter weather you took it at bar A or bar B. There was just further confirmation and less stress at bar B. Ultimately if your strategy says take it at bar A and you’ve backtested that than you have no need to overthink like this.
MORE SUCH VIDEOS, PLEASE! :)
Hi Lance... Is there a book or site you recommend for a better understanding of EV? I have tradervue... Does it have a setting for EV?
Thx
This reminds me of something I heard Tom Dante say, that Reward/Risk is bs. Not that you shouldn't have it in your plan, but after you've entered the initial R/R goes right out the window. I.e. Enter w/a 3/1 R/R, it goes up an R and now you have 2/2; Goes up another R and you're now risking 3 looking for 1. It's why I reduce the position (take some profit) on the way up on scalps and gradually raise stops on swings; Trying to keep the R/R in my favor (especially in 2022). As always, thanks for the video.
Rolling R:R is goat
So dca into a position will increase ev.
THANKS
Lance, what do you mean by “the box” in the “relating it back to trading” slide?
man that poker vid in the beginning is amazing haha
How do you get the ev calculation? What formula are you using to get eg $6.10?
I have extensively backtested/journaled close to 700 of my trades. I have backtested all of these trades with all or nothing strategies as well as scale out strategies and I've found that the all or nothing is both more consistently profitable and more net profitable than any scale-out strategies I have found.
have you changed your opinion on this?
It probably depends on your trading style. For my personal method of trading all or nothing is best, but I have backtested some strategies where scaling out is more consistently profitable. I think it is helpful to idenitify key levels of supply/demand including moving averages or bollinger bands where you should scale out. But my method of trading relies on trading large gaps to the next supply/demand, so it is a mistake to take profit before those levels are hit.
When you are up to bat, do you decide whether or not and how you are going to swing before the ball is pitched? Or do you wait until is it thrown and take that new info into consideration before making your swing (or not and how) decision?
I'd say before it is thrown you should have a 90% idea of what you are going to do.
The last 10% is watching and aiming to this particular pitch. How I treat it personally
How do you calculate The EV on compounded account?
I would like to see a video on the best strategy for passing a Prop Firm?
8:46 if you ride the trade all the way to bar C and your risk is still 20 bucks down, you better have your head checked, lol.
I would love to watch Lance break down a few of his A+ setups/trades. That would be monumental.
The loss trades are more informative.
I like the topic but dont like how the risk is being left the same from the initial idea. In all examples after first column ev id never use the original stop loss for those entries instead lower it substantially. If the trade is going to target its going to go to target and if not then i wanna get out quick and not lose more than needed waiting for the original stop loss.
But then you have three different trades altogether and the thesis is different for each one. Your initial thesis is “this won’t break above/below that swing high/low” but by the third trade it’s something along the lines of “this won’t retrace to the lower timeframe pivot”, which is not a good trade considering there’s a huge chance it does indeed even wick beneath the pivot.
@@thrls No the thesis is the same you have a expected move to a target. Why put such a huge stop if your waiting for later confirmation of this trade move?
good stuff
The problem with a lot of independent traders is they do not have a setup that has a positive EV (statistical edge). It only takes one setup to make money. Master it!