3 Types of Trades – HPT – MPT and NT
Trading isn’t just about luck.
Trading isn’t just about strategy.
Trading is about stats and probabilities and know how to execute with the right money management.
Also, here is a surprise.
Not all setups are created equal.
There are three types of trades with trading.
Whether you’re trading Dow Futures, EUR/USD or Gold – the setups can come in one of three ways.
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HIGH Probability Trade (HPT)
This type of trade is your bread and butter.It’s when the market conditions match your system’s criteria perfectly.
It’s where you get a full on 5/5 check markets all around.
And everything screams (J.T..TT – Just Take The Trade!)
For me a HIGH PROBABILITY TRADE is when I see the following with a long (buy).
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Previous trend is up.
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Breakout pattern has formed
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Price has broken above the pattern and opened above
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The price is above BOTH the 20MA and the 200MA.
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There is a strong uptrend to follow
Damn!
That’s perfect and that’s where I risk 1% to 2% of my portfolio.
But why is it high probability?
Because your trading system, which you’ve backtested and trusted, shows a high success rate in these conditions.
HIGH PROBABILITY MEANS – You know the chances of success and winning are high.Moving on…
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MEDIUM Probability Trade (MPT)
The market almost lines up with your system.
It’s close but not perfect.
This is where the likelihood is still HIGH but not as high as a HPT.
This is where your indicators could be mixed or some of your criteria aren’t fully met.
Yet, you still see potential and you will still risk (less) with your trade.
This is where a bit of trader’s intuition and experience come into play.
You decide to take the trade but with a twist.You risk a little less.
For me a MEDIUM PROBABILITY TRADE is when I see the following with a long (buy).
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Previous trend is sideways .
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Breakout pattern has formed
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Price has broken above the pattern and opened above
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The price is above 20MA but below the 200MA.
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There is a strong uptrend to follow.
Not great but willing to risk 0.5%.
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LOW Probability Trade (NO Trade) NT
You want the perfect or almost perfect line up when you trade.
And if the criteria do not line up – it should be a NO show.
The best decision?
Stay out.No trade means no risk.
No trade means – stay neutral.
For me a LOW PROBABILITY TRADE is when I see the following with a long (buy).
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Previous trend is sideways .
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Breakout pattern has sizzled
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Price remains in the pattern and hasn’t crossed yet.
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The price is above 20MA but below the 200MA.
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There is a strong uptrend to follow.
FINAL WORDS:
You need to identify when a trade looks GREAT, GOOD and BAD.
You need to know when to take a trade and what to risk during the times.
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HIGH probability trade (Just Take The Trade!)
– Market lined up perfectly according to the system and can risk 1% – 2%.
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MEDIUM probability trade (Trade but with less risk)
– Market almost lined up perfectly but I will still take the trade and risk 0.5%.
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LOW probability trade (NO trade)
– Market did NOT line up and therefore I’m not taking a trade.
Trade well, live free.
Timon Rossolimos
Founder, MATI Trader
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