The market's direction can swiftly change, with indexes frequently transitioning from a bear market to a bull market precisely when the news is most negative and investor sentiment reaches its lowest point.
For the average person, the strategies are fairly demanding. In actuality, most professionals who have the necessary abilities and knowledge to complete such occupations do so successfully.
True, A lot of folks downplay the role of advisors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for license advisors and came across someone of due diligence, helped a lot to grow my reserve notwithstanding inflation, from $275k to approx. $850k so far
@@tonysilke I did enroll in a handful of trading classes, but they didn't help much. I've been advised to seek the advice of a competent financial counselor; how did you go about doing so?
Sophie Lynn Carrabus is the advisr I use and I'm just putting this out here because you asked. You can Just search the name. You’d find necessary details to work with to set up an appointment.
In trading, possessing technical analysis skills is not sufficient on its own; discipline and emotional maturity play crucial roles in achieving success. Embracing the mindset of "time in the market vs. timing the market" proves valuable, especially during market fluctuations.
Investing has proven to be an incredibly beneficial decision. My cryptocurrency profits continue to play a substantial role in growing my overall wealth, reducing my reliance on my salary
Excellent! I really do have a question. As a beginner interested in trading. How would you recommend we enter into trading ? I will greatly appreciate any suggestions
A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $$275k to $850K...
This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? I'm in dire need of proper portfolio allocation.
55% probability 2 to 1 not worth taking? SMB just slaughtered math and thinks its getting away with it. With 2 to 1, you'd be break even at just 33.3% probability. At 55% you should be taking that trade every single time, no brainer. It's videos like these that give me doubts whether SMB is actually a serious organization. Because, if you traded a couple years in your life, you'd know that a 55% probability 2 to 1 setup is a home run trade, and all the better ones he talked about are pipe dreams. Way to skew beginning traders expectations out of whack SMB, shame on you!
even 65% with 1:1.5 RR is also worth considering taking anytime, yet it is a C trade in EV calc. Unless it is 90% win rate of 1:5 RR then it is an A trade. Something not right.
what you said is very true. if you have a positive EV = decent enough to take that trade multiple times in the long run. likewise there is inverse correlation between higher RR verse win rate, the higher the reward the lower the probability. that is why sometimes a lower RR but higher win rate will still produce the same EV. i find this video informational but the examples are misleading.
If you are trading a couple years you would realise that the strategy in this video is something a noob would come up with. So of course SMB is not seriouse.
00:05 Understanding and maximizing trading edge is crucial for holding winners 02:30 Utilize the SMB Expected Value Calculator for risk-reward evaluation. 07:06 Entry and risk management strategy using 9 EMA and VWAP 09:21 Changing entry decisions can impact the trade's edge, risk, and probabilities. 14:09 Understanding and utilizing positive expectancy in trading 16:31 Using EV calculator to determine trade worthiness 20:40 Using EV (expected value) to assess trades 22:36 Trading strategy involving multiple measured moves and increasing EV. 26:52 Adjusting bet sizing according to increasing EV 28:51 Utilize the EV tool for better trade understanding. Crafted by Merlin AI.
If you have done rigorous backtesting on strategies you'll know that the %win rate and r/r are not static - they are a function of regime/volatility etc. The baseline assumptions of this exercise are shaky to say the least.
That's exactly what I was thinking! Even worse, the win rate% and r/r are not independent of each other, so multiplying them together is mathematically incorrect! In fact, the win rate DEPENDS on the r/r factor, because the higher the r/r factor, the lower the win rate.
Yes this. Win rate changes all the time with the ever changing market. If it was static then eventually everyone would have found the best strategy already
Even with rigorous backtesting, how well can you predict the future based on the past? Even if you live trade something or sim trade something you still don't know if the numbers will hold up moving forward.
@@covingtoncreek If we follow this logic why even trade. Best you can do is try to identify the current market conditions in some regards and figure out if they compliment your prediction. Inspect the previous backtest find causality in Macroeconomics,Sentimental ,Fundamental and Technical analysis and just bet. If you have 3R trade on 70% backtest even if it falls to 55% you are still profitable. What you are saying is correct trading is some form of educated gamble ,but only thing you have in your disposal is the past :D .
According to SMB Scalp Cheat Sheets: The Rubber Band Scalp is 1.6:1 RR, The Second Chance Scalp is 1.9:1 RR, The Hitch Hiker Scalp is 1.9:1 RR, and The BackSide Scalp is 1.4:1 RR. Using this tool basically invalidates every scalp setup that is used on the desk... unless I am misunderstanding something here. Clarification would be nice.
@@osman3404 I’ve got to be honest, from a personal perspective I think scalping is a losing game in the long run. Though I am just one person managing my own capital. The thing about SMB is that they are able to pull mass amounts of data through their traders where those ‘arbitrary’ 50/50 numbers start to become skewed towards positive expectancy/ favorable risk… Sometimes more IS more…
Great video Jeff. I'm a SMB Inside Access member and this tool, along with the play-by-play discussion in this video, brought great insight and help that I'll implement into my trading. Thanks!
Hear the "wicks do the damage but the closed candle tells the story", however, ...now I perceive the reverse true story...how horizontally over time the wicks actually inform of the EV expansion when it occurs towards adjusting the trade setup parameters deeper into the happy zone to hold winners with greater confidence. Grateful that I now have this jewel in deep understanding.
The money is IN the wicks; that is where you can actually SEE the Volatility. A group of say 5 candles with long wicks looking almost in the same area is the most recent steady movement, you don't see it all the time, but it almost always remains to be the area that must be fully tested out and almost a guarantee we will return here.
I’ve been diligently working, saving and contributing towards early retirement and financial freedom, but since covid outbreak, the economy so far has caused my portfolio to underperform, do I keep contributing to my 401k or look at alternative sectors to meet my goals?
Exactly, getting proper financial advise is invaluable, my portfolio is well-matched for every season of the market and recently hit 140% rise from early last year. I and my CFP are working on a 7 figure ballpark goal, tho this could take another year.
My CFA Julianne Iwersen Niemann a renowned figure in her line of work. I recommend researching her credentials further... She has many years of experience and is a valuable resource for anyone looking to navigate the financial market..
May be you know my big family brothers and sisters: @pilatelover, @macaronilover, @sodalover, @videogamelover, @mariacchilover, and so on and so forth . . .
This looks good, but can I ask how do you base the percentage probabilities for the trade? In other words, how do you give a 65, 60, or 50% probability?
In his other video he talks about categorizing your trades A B and C that way you can give probability to a setup based on their risk and expected return.
@@mikenobles1515 i think they can get it because they day trade, so the risk can be very small relative to the potential size of an intraday movement, espeically on a stock thats "in play", they are getting it with very highly skewed r/rs i think. i think this is why they believe that day trading is superior, you not gonna get that on higher timeframe unless you are holding something like bitcoin and you can consitently find things like that
are you new here? there could be many reasons why it isnt good. Just cause a 3R trade has a 60% probability could have a host of reasons why it isnt a very good trade.
probability = ITM/OTM % OTM is an available column for options chains reward = value of the position when its closed (at expiration or its value at your price target) risk = cost to purchase the position
@@Scripture-Songs-That-Stick The probability of it hitting what price by what date? Thats where the distribution comes from - the option chain are all the different targets, so you base the EV input on those. Without a target you cant compute the reward. If you want to outright buy XYZ trading at 100 today, youd look a few months out, and look at the OTM % for the different strikes - are the strikes under 30% OTM high enough away from $100, or is it basically saying that anything over $105 is unlikely? How about the following months? Does the market ever expect it to rise to a point that would actually net some real gains? Just based on which strikes have low % OTM. Just know that only looking at the call OTM % and ignoring the put side can be very misleading - if entering a buy and hold position, there would ideally be more upside IV than downside, or puts close to current show high OTM % while calls equally as far away show a lower OTM %. Being mindful of how this works is a big improvement on how we value trades, meaning if thinking about buying XYZ or ABC, the binary choice can be decided with the "better" EV rather than having the exact # - simply looking at the OTM distribution of the 2 can tell me which the market is more bullish on, and for a "this or that" choice, that can be enough.
Option chain is just complicated.. Gives direction not entry... Understanding price and relationship with liquidity flow iis what work... All other things are just fancy terms..
I find myself having a hard time waiting until my target is hit. I have been burnt so many times where it starts to look great and then crashes out and I lose. I have started to change where I will move my stop up to at least break even if the trade is going well and then up to were I make at least one to one and so on. Now I have been burnt on this also where it comes down and takes me out at break even or one to one then skyrockets right up after that and I could have made my 2 to 1. I have a number of entry's in my notes like " Hey dummy hold until target is hit". But this has also saved me a number of times from losing my trade by either making money or breaking even. Man trading is hard lol. Really like your channels video they have helped me a lot.
Pro tip from a profitable trader. Don't move stop to break even until more structure is formed above stop. Structure is retrace and continuation. Better method is to partial and keep stop where it is or cut trade altogether while in profit if worried. The market is designed to come back and do these retraces just to where people get in to shake weak hands.
This may sound sophomoric, but do you have a detailed method for how you calculate probabilities (50%, 60%, 70%) or do you just pull them out of a hat? And how can the probabilities be reliable if they don't account for market direction or industry-wide trends or plenty of other factors? It makes a big difference in my trading success, so that's why I am curious.
Its not. Every trade is unique. Overall average is 70% but individual trades might have 59, 65, 76, 89, etc. Conditions are different in every trade. Always. He talks like if it was in a vaccum but its not, you have available info to know if its superior or inferior to the average. Like in gto poker. If a certin play is optmal at equilibrium. But you know opponent deviate to one side, you exploit that deviation from the optimal play, because you have the info necessary to change your play. Same in trading. Data + information is the key. Pure data is profitable but you can increase your EV with additional info on the trade you are in
How do we really figure out the percentage that you're mentioning. The expectancy is very arbitrary it seems since it is very difficult to counter in all the factors while calculating the probability of the trade winning. If you could dive a little deeper as to how you have arrived at the percentage that you believe the trade has a chance of winning, it'd give a much better insight as to how to use this tool.
i'm seeing a lot of confusion in the comments with respect to what is a good EV for a discretionary trader. i would stay tuned for future videos on this topic that will clarify the range of trades our traders take and their EVs.
Thank you for your really great video, but where are you starting the VWAP at for daily trades? Does it make a difference where you start the VWAP from? Thanks
Awesome video! Being able to listen to the narration and thought process behind entering/exiting the trades is something I appreciate in this video. Nice to understand your thoughts as the candles were forming and what checks to look for to increase the odds of the trade. Really good video!
Using a specific 'rule based' trading setup and reward to risk ratio will provide you with the relevant win rate or probability of the trade being successful as well as its EV. Here is a cheat sheet: The Edge/EV/Roi%/DD: 60% win rate 8 consecutive losses in 100 trades = 5.7% 1000 trades = 44.9% 2.5% of bank per trade expected drawdown = 10-20% Reward to Risk Ratio 3:1 Expected Value = 1.4 units per trade (Roi 140%) Reward to Risk Ratio 2:1 Expected Value = 0.8 units per trade (Roi 80%) Reward to Risk Ratio 1.5:1 Expected Value = 0.5 units per trade (Roi 50%) 66% win rate 8 consecutive losses in 100 trades = 1.17% 1000 trades = 11.7% 2.5% of bank per trade expected drawdown = 10-20% Reward to Risk Ratio 3:1 Expected Value = 1.64 units per trade (Roi 164%) Reward to Risk Ratio 2:1 Expected Value = 0.98 units per trade (Roi 98%) Reward to Risk Ratio 1.5:1 Expected Value = 0.65 units per trade (Roi 65%)
21:45 what does he mean “we allow our stop to set up for us”? When he says that’s a key component. I don’t understand Edit: is he just saying don’t place the stop reactively or move it up reactively, use key support levels and don’t move it up unless there’s a reason to? Orr
Can somebody explain to me how to calculate professionally the probability of a trade? What sample size is considered fine and also are there some kind of tools or technical things that we use to gain confidence and consider these 50%, 60% correct, and now imaginary numbers?
Hello, thank you for this content ! Can we have real data to confirm that kind of high EV really exists (like a track record of actual trades) ? (I find very impressive that a scalping edge with 60% and 4:1 RR, seem just enough from your perspective) 😃👍👍
i was considering taking the smb options trading course but I noticed in some of their videos they run past or gloss over terms and don't explain in detail or break it down. looking at the comments on this video there are a lot of people that don't understand where the probability calculation (60/40 , etc) is coming from. where is it calculated? based on what? is there another video that explains it? smb posts this video and doesn't answer one comment on it. so they are clearly missing an opportunity to sell their course by not answering people and showing that they are on it and available.
It seems the biggest challenge is coming up with a probability, this seems to be very subjective and open to interpretation. Is there a video that discusses how to arrive at a realistic probability?
The probability is based on how successful you are at picking winners. So in the video, he uses 60%, becasue they are good at it and no what they are doing, and expect to be successful on average 60% of the time.
Hi Jeff, thank you for sharing this. I'm confused as to why a 50% probability of winning a 2 to 1 reward to risk trade is unacceptable to you. My understanding is that if you can consistently achieve that over time across varying market conditions you would be handsomely profitable.
What kind of wvap do you use? Anchored vwap or mobile vwap is ok? And the use of this two indicators, the vwap and the 50 MA is operated as a cross of two MA?
I'd like to see SMB Cap do an educational piece on Maximum Favorable and Maximum Adverse Excursion's...One on the most BASIC metrics is any trade strategy...Unless you know these values...Assigning probabilities (expectancy) on any trade is arbitrary and only best guess. Reward to Risk Ratios cane be easily calculated from MFE/MAE Metrics...Most important number is MAE as this value is a MUST KNOW on where to place stop. Then next step is Position Sizing Calculation. Another Topic SMB Cap would be fantastic to cover...
This may help some folks The Edge/EV/Roi%/DD: 60% win rate 8 consecutive losses in 100 trades = 5.7% 1000 trades = 44.9% 2.5% of bank per trade expected drawdown = 10-20% Reward to Risk Ratio 3:1 Expected Value = 1.4 units per trade (Roi 140%) Reward to Risk Ratio 2:1 Expected Value = 0.8 units per trade (Roi 80%) Reward to Risk Ratio 1.5:1 Expected Value = 0.5 units per trade (Roi 50%) 66% win rate 8 consecutive losses in 100 trades = 1.17% 1000 trades = 11.7% 2.5% of bank per trade expected drawdown = 10-20% Reward to Risk Ratio 3:1 Expected Value = 1.64 units per trade (Roi 164%) Reward to Risk Ratio 2:1 Expected Value = 0.98 units per trade (Roi 98%) Reward to Risk Ratio 1.5:1 Expected Value = 0.65 units per trade (Roi 65%)
bro I really appreciate the way you talk through the emotions of the trade. I have such a solid edge. like so solid. emotions are real! just get rid of the sell button please
Great Video and top notch info as usual but interesting that trade he said we could have skipped/shouldn't take incidentally works well with my strategy so food for thought.
I'm not sure how the back end of the EV calculates the result, but having tried it, I've found that if you enter 70% and a 2 to 1 RR it gives you an EV of 1.1, a C trade. But if you enter 70% and a 4 to 2 RR, which is the same as a 2 to 1, then it gives an EV of 2.2, an A trade.
Their BE is using: E = P*Reward - (1-P)*Risk which if you expand gives: E = P*Reward + P*Risk - Risk This gives you EV based on ‘Risk’ number of trades, which is not what they’re intending. However what they should be calc is risk normalized to 1: E/Risk = P*(Reward/Risk) + P - 1
@@MrTonyO_777 great catch. Your formula works. I'd question the categories SMB uses - their other videos say a 2:1 55% winrate is a killer strategy however in their tool it gets a "This trade is not worth taking"-recommendation. Not consistent.
buying the 9 to vwap cross is too late in most cases, its buying mid range at 50-62-66 fibs retrace, and it can go against you with very good probability, you put SL at equal lows where algos casually hunt for stops, this is just a hand picked example of where this works
Thanks for sharing your knowledge and examples. Doesn't it make sense to fully automate it? I would automate it or another similar strategy that based on some indicators right after few times doing it manually. I agree that first time trader needs to play manually just to learn it, but executing it constantly it's too much of possible to have human error. Even volume and comparison of buyer/sellers can be automated. Sorry I didn't want to be impolite.
@@patrickrundle3532 yes in this case that is how they used measured move. Think of it like if something had this move from here to there then the next leg might be an extension of that move.
How do you determine the expected reward likely on a trade ? For stop loss i can say the previous low or hight depneding on buy or sell. But for expected target how do we know how much will it reach?
Since I dont have a strategy thats been backtested extensively to determine winning probability (yes I know) can I use the ITM/OTM % on 0DTE options trades in that column of the calculator?
This is great!! I have question. Can this VWAP and 9 period CRO apply to the futures? My guess is yes. I have designed, named patterns and turned them into auto traders, well, had someone code them for me. This looks like a great addition to break outs. You guys are great!! Keep up the good work. Really makes you think.
Maybe I missed something but I don't see the value in the calculator at all. As far as I can see, the value is all in the variables, the probability of success and risk/reward, and really, if the minimum for entry is 60%, then it's all about correctly determining the risk/reward and I don't need a calculator to tell me that an 8 to 1 r/r is better than a 2 to 1 r/r. But maybe there's something here I don't understand about EV.
yep. To be helpful: this is a tool to understand EV and what setups to NOT take and what to expect from each. It is a tool to be used to tweak your entry, your stop and your exits as a whole dynamic system. It can be used to find setups that have way way way higher EV and setups that fits your personality and lifestyle. It can help teach your how to trade better. One system I trade have an EV that varies between 10-20 but the setups are quite rare and behaviorally difficult to execute and it demands very large positions. While a system with a 2-1 and 55% probability that is consistent can be preferable for some people and situations.
So your amazing tool tells you a score based on a subjective opinion of what probability the trade has to go in your direction, taken from the users probability opinion?
I have created a similar type of process just without graphs for my stats and trading journal log. 1. Suggested R:R based on win rate of trade setup. 2. R:R for the trade you are looking to take with target in mind (analysis). 3. R:R for the actual returns you've made from trade (result). This is all built into journal and happens automatically after inputing risk, reward, entry and exit, and trade setup. Has helped me from taking bad trades that dont align with R:R for win rate per setup. Has also helped me measure which trade setups I need to work on. If actual R:R for trades executed is below that of analysis, why did I close early and what can I implement in future to hold to target.
is it realistic to get expectancies this high on daily charts? is this why they think day trading is superior? idk if i could get this kind of expectancy on higher time frames. their calculator says A is 2.5+ for every dollar, ive never even heard of such high expectancy setups
The issue with this is that most traders do not have the technical ability to properly backtest strategies, so the data being plugged into the calculator is most likely way off. Garbage in garbage out..
I trade small cap gappers, and the 9 ema vwap cross over is very effective. In this current market, you are better off buying at support, with tight stops below the base, as there is much less follow through right now.
The market's direction can swiftly change, with indexes frequently transitioning from a bear market to a bull market precisely when the news is most negative and investor sentiment reaches its lowest point.
For the average person, the strategies are fairly demanding. In actuality, most professionals who have the necessary abilities and knowledge to complete such occupations do so successfully.
True, A lot of folks downplay the role of advisors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for license advisors and came across someone of due diligence, helped a lot to grow my reserve notwithstanding inflation, from $275k to approx. $850k so far
@@tonysilke I did enroll in a handful of trading classes, but they didn't help much. I've been advised to seek the advice of a competent financial counselor; how did you go about doing so?
Sophie Lynn Carrabus is the advisr I use and I'm just putting this out here because you asked. You can Just search the name. You’d find necessary details to work with to set up an appointment.
Thanks a lot for this suggestion. I needed this myself, I looked her up, and I have sent her an email. I hope she gets back to me soon.
In trading, possessing technical analysis skills is not sufficient on its own; discipline and emotional maturity play crucial roles in achieving success. Embracing the mindset of "time in the market vs. timing the market" proves valuable, especially during market fluctuations.
Investing has proven to be an incredibly beneficial decision. My cryptocurrency profits continue to play a substantial role in growing my overall wealth, reducing my reliance on my salary
Excellent! I really do have a question. As a beginner interested in trading. How would you recommend we enter into trading ? I will greatly appreciate any suggestions
A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $$275k to $850K...
This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? I'm in dire need of proper portfolio allocation.
@@Jamaal67i Her name is Annette Christine Conte can't divulge much. Most likely, the internet should have her basic info, you can research if you like
55% probability 2 to 1 not worth taking? SMB just slaughtered math and thinks its getting away with it. With 2 to 1, you'd be break even at just 33.3% probability. At 55% you should be taking that trade every single time, no brainer. It's videos like these that give me doubts whether SMB is actually a serious organization. Because, if you traded a couple years in your life, you'd know that a 55% probability 2 to 1 setup is a home run trade, and all the better ones he talked about are pipe dreams. Way to skew beginning traders expectations out of whack SMB, shame on you!
even 65% with 1:1.5 RR is also worth considering taking anytime, yet it is a C trade in EV calc. Unless it is 90% win rate of 1:5 RR then it is an A trade. Something not right.
what you said is very true. if you have a positive EV = decent enough to take that trade multiple times in the long run. likewise there is inverse correlation between higher RR verse win rate, the higher the reward the lower the probability. that is why sometimes a lower RR but higher win rate will still produce the same EV. i find this video informational but the examples are misleading.
If you are trading a couple years you would realise that the strategy in this video is something a noob would come up with. So of course SMB is not seriouse.
Everyones a quant in the comments
That's exactly my setup intrade everyday simple trend continuation 1:2 sitting at 55% win reate
00:05 Understanding and maximizing trading edge is crucial for holding winners
02:30 Utilize the SMB Expected Value Calculator for risk-reward evaluation.
07:06 Entry and risk management strategy using 9 EMA and VWAP
09:21 Changing entry decisions can impact the trade's edge, risk, and probabilities.
14:09 Understanding and utilizing positive expectancy in trading
16:31 Using EV calculator to determine trade worthiness
20:40 Using EV (expected value) to assess trades
22:36 Trading strategy involving multiple measured moves and increasing EV.
26:52 Adjusting bet sizing according to increasing EV
28:51 Utilize the EV tool for better trade understanding.
Crafted by Merlin AI.
If you have done rigorous backtesting on strategies you'll know that the %win rate and r/r are not static - they are a function of regime/volatility etc. The baseline assumptions of this exercise are shaky to say the least.
That's exactly what I was thinking! Even worse, the win rate% and r/r are not independent of each other, so multiplying them together is mathematically incorrect! In fact, the win rate DEPENDS on the r/r factor, because the higher the r/r factor, the lower the win rate.
Yes this. Win rate changes all the time with the ever changing market. If it was static then eventually everyone would have found the best strategy already
he's using those assumptions for brevity's sake. he even said "lets make it easy, assume 60/40". it's obviously not that clean cut.
Even with rigorous backtesting, how well can you predict the future based on the past? Even if you live trade something or sim trade something you still don't know if the numbers will hold up moving forward.
@@covingtoncreek If we follow this logic why even trade. Best you can do is try to identify the current market conditions in some regards and figure out if they compliment your prediction. Inspect the previous backtest find causality in Macroeconomics,Sentimental ,Fundamental and Technical analysis and just bet. If you have 3R trade on 70% backtest even if it falls to 55% you are still profitable. What you are saying is correct trading is some form of educated gamble ,but only thing you have in your disposal is the past :D .
According to SMB Scalp Cheat Sheets: The Rubber Band Scalp is 1.6:1 RR, The Second Chance Scalp is 1.9:1 RR, The Hitch Hiker Scalp is 1.9:1 RR, and The BackSide Scalp is 1.4:1 RR. Using this tool basically invalidates every scalp setup that is used on the desk... unless I am misunderstanding something here. Clarification would be nice.
You're missing one of the three components.... 'Probability'.
The entirety of this video solely revolved around those 3 simple components and you still missed 1. You're ngmi.
@@Francesdsk but the probability for these scalp trades are arbitrary or always 50/50 at best
@@osman3404 I’ve got to be honest, from a personal perspective I think scalping is a losing game in the long run. Though I am just one person managing my own capital. The thing about SMB is that they are able to pull mass amounts of data through their traders where those ‘arbitrary’ 50/50 numbers start to become skewed towards positive expectancy/ favorable risk… Sometimes more IS more…
@@osman3404 not true.
Great video Jeff. I'm a SMB Inside Access member and this tool, along with the play-by-play discussion in this video, brought great insight and help that I'll implement into my trading. Thanks!
I truly appreciate the amount of coaching and tools that you provide in your free videos. Thank you.
I can see how this helps keep a healthy perspective in a trade. Thanks Jeff!
Hear the "wicks do the damage but the closed candle tells the story", however, ...now I perceive the reverse true story...how horizontally over time the wicks actually inform of the EV expansion when it occurs towards adjusting the trade setup parameters deeper into the happy zone to hold winners with greater confidence. Grateful that I now have this jewel in deep understanding.
The money is IN the wicks; that is where you can actually SEE the Volatility.
A group of say 5 candles with long wicks looking almost in the same area is the most recent steady movement, you don't see it all the time, but it almost always remains to be the area that must be fully tested out and almost a guarantee we will return here.
I’ve been diligently working, saving and contributing towards early retirement and financial freedom, but since covid outbreak, the economy so far has caused my portfolio to underperform, do I keep contributing to my 401k or look at alternative sectors to meet my goals?
keep contributing to your 401K, remember you are in for the long haul, but I'd suggest you consider financial advisory
Exactly, getting proper financial advise is invaluable, my portfolio is well-matched for every season of the market and recently hit 140% rise from early last year. I and my CFP are working on a 7 figure ballpark goal, tho this could take another year.
My CFA Julianne Iwersen Niemann a renowned figure in her line of work. I recommend researching her credentials further... She has many years of experience and is a valuable resource for anyone looking to navigate the financial market..
How do you find the probability?
You make it up. Just like the rest.
Holy macaroni SMB. Jeff is such a gold mine. Wish I could see him in Orlando next month. This was most excellent as is your Inside Access program.
May be you know my big family brothers and sisters:
@pilatelover, @macaronilover, @sodalover, @videogamelover, @mariacchilover, and so on and so forth . . .
Thank you for all you do 😊 I'm grateful to be a part of your community
This looks good, but can I ask how do you base the percentage probabilities for the trade? In other words, how do you give a 65, 60, or 50% probability?
Good question. Can anybody please answer?
Yes, am ready these comments in hopes there's an answer here 'cause I didn't catch it in the vid. Anyone have the answer?
same here
Maybe just assumption looking at the price action.
In his other video he talks about categorizing your trades A B and C that way you can give probability to a setup based on their risk and expected return.
In what world is 60% probability of 3R a "B" trade? That is an incredible edge!
I’m happy with a 60% 1:1 Atleast I can afford groceries and gas. I have no idea what world they live in to be honest
@@mikenobles1515 i think they can get it because they day trade, so the risk can be very small relative to the potential size of an intraday movement, espeically on a stock thats "in play", they are getting it with very highly skewed r/rs i think. i think this is why they believe that day trading is superior, you not gonna get that on higher timeframe unless you are holding something like bitcoin and you can consitently find things like that
are you new here? there could be many reasons why it isnt good. Just cause a 3R trade has a 60% probability could have a host of reasons why it isnt a very good trade.
@@setfreeyourself can you name one?
This channel thinks also 5 day is the maximum for a swing. I think they are mostly scalpers that s why they try to achieve higher win rate
probability = ITM/OTM % OTM is an available column for options chains
reward = value of the position when its closed (at expiration or its value at your price target)
risk = cost to purchase the position
Can you expand on how you calculate the probability? What about for stocks (not options?)
@@Scripture-Songs-That-Stick The probability of it hitting what price by what date? Thats where the distribution comes from - the option chain are all the different targets, so you base the EV input on those. Without a target you cant compute the reward. If you want to outright buy XYZ trading at 100 today, youd look a few months out, and look at the OTM % for the different strikes - are the strikes under 30% OTM high enough away from $100, or is it basically saying that anything over $105 is unlikely? How about the following months? Does the market ever expect it to rise to a point that would actually net some real gains? Just based on which strikes have low % OTM. Just know that only looking at the call OTM % and ignoring the put side can be very misleading - if entering a buy and hold position, there would ideally be more upside IV than downside, or puts close to current show high OTM % while calls equally as far away show a lower OTM %.
Being mindful of how this works is a big improvement on how we value trades, meaning if thinking about buying XYZ or ABC, the binary choice can be decided with the "better" EV rather than having the exact # - simply looking at the OTM distribution of the 2 can tell me which the market is more bullish on, and for a "this or that" choice, that can be enough.
Option chain is just complicated.. Gives direction not entry...
Understanding price and relationship with liquidity flow iis what work... All other things are just fancy terms..
This is amazing and not clickbait lol. Great info thanks
I find myself having a hard time waiting until my target is hit. I have been burnt so many times where it starts to look great and then crashes out and I lose. I have started to change where I will move my stop up to at least break even if the trade is going well and then up to were I make at least one to one and so on. Now I have been burnt on this also where it comes down and takes me out at break even or one to one then skyrockets right up after that and I could have made my 2 to 1. I have a number of entry's in my notes like " Hey dummy hold until target is hit". But this has also saved me a number of times from losing my trade by either making money or breaking even. Man trading is hard lol. Really like your channels video they have helped me a lot.
Pro tip from a profitable trader. Don't move stop to break even until more structure is formed above stop. Structure is retrace and continuation.
Better method is to partial and keep stop where it is or cut trade altogether while in profit if worried. The market is designed to come back and do these retraces just to where people get in to shake weak hands.
Try using parabolic sar. It’s super useful for consistently chasing maximum profit from each position.
@@kingal89maybe?
Inresting, How do you get the probabilitynthough?
Somebody please?
This may sound sophomoric, but do you have a detailed method for how you calculate probabilities (50%, 60%, 70%) or do you just pull them out of a hat? And how can the probabilities be reliable if they don't account for market direction or industry-wide trends or plenty of other factors? It makes a big difference in my trading success, so that's why I am curious.
Trade history bro lol, not complicated, if you have 60% winrate on a set up over 12 years then that's your probability
Its not. Every trade is unique. Overall average is 70% but individual trades might have 59, 65, 76, 89, etc.
Conditions are different in every trade. Always.
He talks like if it was in a vaccum but its not, you have available info to know if its superior or inferior to the average.
Like in gto poker.
If a certin play is optmal at equilibrium. But you know opponent deviate to one side, you exploit that deviation from the optimal play, because you have the info necessary to change your play. Same in trading.
Data + information is the key.
Pure data is profitable but you can increase your EV with additional info on the trade you are in
@@infosrelevantes7146 if overall average is 70% that's all that matters, who cares about Monday Winrate when you're trading for 40 years?
If a trader doesn't have a history of winning, then how is he getting that probability %?
@@ricky911 most traders don't make money...
Связка актуальна и хороша в работе, профит - радует! Спасибо команде за проделанную работу!
How do you come up with Probability %, Reward and Risk numbers? Also, is this for stocks or options? Thank you.
How do you know the probability?
Trading is just you game no one can teach you to master yourself but you
How do we really figure out the percentage that you're mentioning. The expectancy is very arbitrary it seems since it is very difficult to counter in all the factors while calculating the probability of the trade winning. If you could dive a little deeper as to how you have arrived at the percentage that you believe the trade has a chance of winning, it'd give a much better insight as to how to use this tool.
It felt like he was making up the figure
I enjoy listening to SMB. Value- mapping is everything
I have never heard of this, I do use and monitor expected move, but the E value, is new. I will look into this more.. thank you
i'm seeing a lot of confusion in the comments with respect to what is a good EV for a discretionary trader. i would stay tuned for future videos on this topic that will clarify the range of trades our traders take and their EVs.
From : @theshortbear
“The best for the mind is either to focus on a 70% 1.5/1+ or 40% 3/1+ in my opinion. “
Is the probability--which is crucial in the math--just eyeballed from experience? Where can I get that number so that I don't skew all of my math?
Thank you for your really great video, but where are you starting the VWAP at for daily trades? Does it make a difference where you start the VWAP from? Thanks
how are you calculating the probability?
I'm guessing option Deltas?
@@tonysoprano1454 can you explain more?
Awesome video! Being able to listen to the narration and thought process behind entering/exiting the trades is something I appreciate in this video. Nice to understand your thoughts as the candles were forming and what checks to look for to increase the odds of the trade. Really good video!
What is the trading software you are using to practice?
How do you determine the probability of a trade 55%,60% 65% 99% etc?
Using a specific 'rule based' trading setup and reward to risk ratio will provide you with the relevant win rate or probability of the trade being successful as well as its EV. Here is a cheat sheet:
The Edge/EV/Roi%/DD:
60% win rate
8 consecutive losses in 100 trades = 5.7%
1000 trades = 44.9%
2.5% of bank per trade expected drawdown = 10-20%
Reward to Risk Ratio 3:1 Expected Value = 1.4 units per trade (Roi 140%)
Reward to Risk Ratio 2:1 Expected Value = 0.8 units per trade (Roi 80%)
Reward to Risk Ratio 1.5:1 Expected Value = 0.5 units per trade (Roi 50%)
66% win rate
8 consecutive losses in 100 trades = 1.17%
1000 trades = 11.7%
2.5% of bank per trade expected drawdown = 10-20%
Reward to Risk Ratio 3:1 Expected Value = 1.64 units per trade (Roi 164%)
Reward to Risk Ratio 2:1 Expected Value = 0.98 units per trade (Roi 98%)
Reward to Risk Ratio 1.5:1 Expected Value = 0.65 units per trade (Roi 65%)
Thank you for this video. I’m watching your videos for the educational and motivational purposes.
21:45 what does he mean “we allow our stop to set up for us”? When he says that’s a key component. I don’t understand
Edit: is he just saying don’t place the stop reactively or move it up reactively, use key support levels and don’t move it up unless there’s a reason to? Orr
Can somebody explain to me how to calculate professionally the probability of a trade?
What sample size is considered fine and also are there some kind of tools or technical things that we use to gain confidence and consider these 50%, 60% correct, and now imaginary numbers?
If someone could calculate such probabilities they would never sell it
You simply look at how many times the setup has worked over a series of trades
Hello, thank you for this content ! Can we have real data to confirm that kind of high EV really exists (like a track record of actual trades) ? (I find very impressive that a scalping edge with 60% and 4:1 RR, seem just enough from your perspective) 😃👍👍
Hi Jeff, really, an eye opening video for me! Changing perspective.
i was considering taking the smb options trading course but I noticed in some of their videos they run past or gloss over terms and don't explain in detail or break it down. looking at the comments on this video there are a lot of people that don't understand where the probability calculation (60/40 , etc) is coming from. where is it calculated? based on what? is there another video that explains it? smb posts this video and doesn't answer one comment on it. so they are clearly missing an opportunity to sell their course by not answering people and showing that they are on it and available.
It seems the biggest challenge is coming up with a probability, this seems to be very subjective and open to interpretation. Is there a video that discusses how to arrive at a realistic probability?
The probability is based on how successful you are at picking winners. So in the video, he uses 60%, becasue they are good at it and no what they are doing, and expect to be successful on average 60% of the time.
Hi Jeff, thank you for sharing this. I'm confused as to why a 50% probability of winning a 2 to 1 reward to risk trade is unacceptable to you. My understanding is that if you can consistently achieve that over time across varying market conditions you would be handsomely profitable.
It might be because of the "opportunity costs" of the 3 to 1 and 4 to 1.
It's the time value of money. He'd make more money if he put that capital into better EV trades.
Thanks. Jeffrey from South Africa 😊
How in the world would you know you're Probability whether it's 60% or 65% or 70%?
What kind of wvap do you use? Anchored vwap or mobile vwap is ok? And the use of this two indicators, the vwap and the 50 MA is operated as a cross of two MA?
yea and how on earth would you quantify the odds of the trade hitting before it even hits
Where does the 60 or 50 percent coming from ? What shows that it’s
That number in order to input it into the calculator ..
I'd like to see SMB Cap do an educational piece on Maximum Favorable and Maximum Adverse Excursion's...One on the most BASIC metrics is any trade strategy...Unless you know these values...Assigning probabilities (expectancy) on any trade is arbitrary and only best guess. Reward to Risk Ratios cane be easily calculated from MFE/MAE Metrics...Most important number is MAE as this value is a MUST KNOW on where to place stop. Then next step is Position Sizing Calculation. Another Topic SMB Cap would be fantastic to cover...
Thank you very much, but I do not get where so your get the probability and plug in to the tool
where do you get the probability to input to the EV calculator, in advance of the trade? And what type of calculation does the EV calculator do?
How do you even determine the probabilities?
How are you determine the probability percentage?
through data, you backtest and test your setups in real life. record the setups and your results
I speak to a fortune teller.
This may help some folks
The Edge/EV/Roi%/DD:
60% win rate
8 consecutive losses in 100 trades = 5.7%
1000 trades = 44.9%
2.5% of bank per trade expected drawdown = 10-20%
Reward to Risk Ratio 3:1 Expected Value = 1.4 units per trade (Roi 140%)
Reward to Risk Ratio 2:1 Expected Value = 0.8 units per trade (Roi 80%)
Reward to Risk Ratio 1.5:1 Expected Value = 0.5 units per trade (Roi 50%)
66% win rate
8 consecutive losses in 100 trades = 1.17%
1000 trades = 11.7%
2.5% of bank per trade expected drawdown = 10-20%
Reward to Risk Ratio 3:1 Expected Value = 1.64 units per trade (Roi 164%)
Reward to Risk Ratio 2:1 Expected Value = 0.98 units per trade (Roi 98%)
Reward to Risk Ratio 1.5:1 Expected Value = 0.65 units per trade (Roi 65%)
bro I really appreciate the way you talk through the emotions of the trade. I have such a solid edge. like so solid. emotions are real! just get rid of the sell button please
Great Video and top notch info as usual but interesting that trade he said we could have skipped/shouldn't take incidentally works well with my strategy so food for thought.
You have the back tested data on the performance of trades with certain entry parameters to determine the win rate to input the EV correct??
Seems as though this would certainly make it easier to grade individual trades for sizing.
I'm not sure how the back end of the EV calculates the result, but having tried it, I've found that if you enter 70% and a 2 to 1 RR it gives you an EV of 1.1, a C trade. But if you enter 70% and a 4 to 2 RR, which is the same as a 2 to 1, then it gives an EV of 2.2, an A trade.
Their BE is using:
E = P*Reward - (1-P)*Risk
which if you expand gives:
E = P*Reward + P*Risk - Risk
This gives you EV based on ‘Risk’ number of trades, which is not what they’re intending.
However what they should be calc is risk normalized to 1:
E/Risk = P*(Reward/Risk) + P - 1
Let R:= Reward/Risk
Then can simply it to:
EV = P*(R+1) - 1
@@MrTonyO_777 great catch. Your formula works. I'd question the categories SMB uses - their other videos say a 2:1 55% winrate is a killer strategy however in their tool it gets a "This trade is not worth taking"-recommendation. Not consistent.
That move up was just beautiful. Price flow was structured af
buying the 9 to vwap cross is too late in most cases, its buying mid range at 50-62-66 fibs retrace, and it can go against you with very good probability, you put SL at equal lows where algos casually hunt for stops, this is just a hand picked example of where this works
I will tell you the secret if you want...
How did he come up with the 60% or 65% probability rates?
Thanks for sharing your knowledge and examples. Doesn't it make sense to fully automate it? I would automate it or another similar strategy that based on some indicators right after few times doing it manually. I agree that first time trader needs to play manually just to learn it, but executing it constantly it's too much of possible to have human error. Even volume and comparison of buyer/sellers can be automated.
Sorry I didn't want to be impolite.
how did you calculate the probability for each trade?
Eye opening, thanks f sharing the tool ppl
What VWAP are you using for the "Fashionably Late" trade?
target is one measured move? what is one measured move? I have to go back and review, I think it was in a previous video.
actually I think I remember now, it's low of the day to the VWAP for longs, or high of the day to VWAP for shorts, is this correct?
@@patrickrundle3532 yes in this case that is how they used measured move. Think of it like if something had this move from here to there then the next leg might be an extension of that move.
How do you determine the expected reward likely on a trade ? For stop loss i can say the previous low or hight depneding on buy or sell. But for expected target how do we know how much will it reach?
Good stuff, Jeff. Very good video.
Since I dont have a strategy thats been backtested extensively to determine winning probability (yes I know) can I use the ITM/OTM % on 0DTE options trades in that column of the calculator?
How do you call and measure the percentage?
if this was truly a hidden gem, it wouldnt be shared
Hey. How, in the first place, do you know the probability of your trade working out?
Can we use this EV approach in options
Jeff where do you get this "EV calculator"?
This is great!! I have question. Can this VWAP and 9 period CRO apply to the futures? My guess is yes. I have designed, named patterns and turned them into auto traders, well, had someone code them for me. This looks like a great addition to break outs. You guys are great!! Keep up the good work. Really makes you think.
I like the video editing to make it look professional when you record in a room with a green screen...
Спасибо, бомбезная связка, есть профит!
Say you have your exit, but you see a bull flag forming like in that example, do you leave a runner or it’s up to the trader.
Maybe I missed something but I don't see the value in the calculator at all. As far as I can see, the value is all in the variables, the probability of success and risk/reward, and really, if the minimum for entry is 60%, then it's all about correctly determining the risk/reward and I don't need a calculator to tell me that an 8 to 1 r/r is better than a 2 to 1 r/r. But maybe there's something here I don't understand about EV.
yep. To be helpful: this is a tool to understand EV and what setups to NOT take and what to expect from each. It is a tool to be used to tweak your entry, your stop and your exits as a whole dynamic system. It can be used to find setups that have way way way higher EV and setups that fits your personality and lifestyle. It can help teach your how to trade better. One system I trade have an EV that varies between 10-20 but the setups are quite rare and behaviorally difficult to execute and it demands very large positions. While a system with a 2-1 and 55% probability that is consistent can be preferable for some people and situations.
I’m still confused about how you were figuring out probability, reward and risk by just looking at the candle chart.
How to trade your account with my strategy ?
I have a question: how do you define the % of probability to be reasonable?
Which trading is good. Forex or Stock??
Forex is best ✌️
@@Sambhav-SWhich platform for forex
@@MK-MohitkadyanWinprofFX is the best according to me
@@Sambhav-Sokay what about brokerage? How much
@@MK-MohitkadyanThey don't charge brokerage brother
Топовая связка, всегда в деле.
How do you know if a trade is 50% or 60% certain?
what platform is that?🤔
SMB keeps rolling out the best tools and training on the street. Thanks guys
really? wow
So your amazing tool tells you a score based on a subjective opinion of what probability the trade has to go in your direction, taken from the users probability opinion?
I have created a similar type of process just without graphs for my stats and trading journal log.
1. Suggested R:R based on win rate of trade setup.
2. R:R for the trade you are looking to take with target in mind (analysis).
3. R:R for the actual returns you've made from trade (result).
This is all built into journal and happens automatically after inputing risk, reward, entry and exit, and trade setup. Has helped me from taking bad trades that dont align with R:R for win rate per setup. Has also helped me measure which trade setups I need to work on. If actual R:R for trades executed is below that of analysis, why did I close early and what can I implement in future to hold to target.
is it realistic to get expectancies this high on daily charts? is this why they think day trading is superior? idk if i could get this kind of expectancy on higher time frames. their calculator says A is 2.5+ for every dollar, ive never even heard of such high expectancy setups
80% and 2:1 is a B trade? I'm lost
thanks Jeff, downloaded the calculator! Also what trading platform is that, it looks really clean and easy to use!
What book 📚📖 has all rules and ways to trade? What is it called and who wrote it? Who writes training manual to get licence?
what if the trade goes against you, would you hold until your stoploss and not trail stops?
What is an EV you keep mentioning?
Whoa... I was just managing my $IBIT long-term position. Small world.
premarket open, Jeff?
The issue with this is that most traders do not have the technical ability to properly backtest strategies, so the data being plugged into the calculator is most likely way off. Garbage in garbage out..
I trade small cap gappers, and the 9 ema vwap cross over is very effective.
In this current market, you are better off buying at support, with tight stops below the base, as there is much less follow through right now.
How can you know your reward...? Risk is all you can know.
you can have a probabalistic reward based on the history of this setup.