Instead of trading using technical or fundamental analysis, some people prefer to use maths, and probability.
What if we placed a buy and a sell trade simultaneously?
There are three different possible outcomes to this trading strategy:
0% chance both trades will be in profit.
66% chance one trade will be in profit, and the other trade will be at a loss.
33% chance both trades will be at a loss.
So as long as the take profit is 3x bigger than the stop loss, the theory is that we should still be in profit in the long run. Let’s plug some numbers in to see what we’ve got.
Let’s say a profit = $30
a loss = -$10
66% chance profit is $30 – $10 = $20
33% chance loss is -$10 – $10 = -$20
So overall, the profit for both trades should average out to be $20.
Place a BUY trade and place a SELL trade simultaneously
Take profit should be double the stop loss pips.