Avoid Low Probability Trading

Don’t waste your time by low probability trading. After share trading (or trading other types of markets) you'll learn that some types of trade setups tend to pay off more often while others are duds and end up playing psychology games with your mind and waste your emotional energy. One example of low probability trading is picking tops and bottoms.

In poker, many professionals play the game based on the probability of their hand compared to those dealt on the table. Pros shun low chance winners and play the cards which favour the current gameplay. Just like having a punt at lotto gives you a very low probability of winning, out of so many different number combinations, players have no control over who will win.

Your goal in trading the markets is to increase your chances of making money. By recognising these low probability share trading opportunities you will learn avoid them as they won't help your trading bottom line.

Picking tops and bottoms in strong trending markets is definitely a low probability trading activity. Although you may be trying to follow the axiom, “buy low, sell high,” you’ll be doing your trading a disservice.

Buying a stock when the market is clearly trending down, with strength, is like attempting to catch a falling knife. "Oh this is it, it's reached some sort of support, this HAS GOT TO BE THE BOTTOM." The next moment the stock price falls past the support and now you're playing catch up. I'd be desperate and start doing a "repair trade” strategy by either opening an opposite position in my CFD trading account or if I really believe the stock would recover (I’m such an idiot), then I would do a reverse dollar averaging trade (which is simply stupid, but at that point I’ve lost all logical reasoning to my trading). SOLUTION: Just don’t pick tops and bottoms. It’s a low probability trading strategy and if you decide to play it, you’ll just tie yourself in knots, by complicating your trading needlessly and above all adding to your brokerage and commissions costs.

The best traders learn which share trading opportunities are more likely to deliver rewards is a skill which is learned from trading many times.

Other Low Probability Trade Techniques and Strategies

• No exit strategy. Ignoring your pre-decided stop loss levels.
• Buying into a stock after the price has made a great move and your indicators are plainly showing that it is overbought
• Buying a stock close to a resistance level or at the top of a trading channel
• Buying once an upward sloping trendline is broken is also a poor choice as this could indicate a exhausted up trend.
• Look at your trading journal and check out which trades are giving you the most return and which setups continuously fail to deliver any profits to your trading bottom line.