Trading edge - scenarios

Scenario 1

1.You place 50 BUY trades and 50 SELL trades with no specialist knowledge

2.You set your stop loss and take profit equally at say 50 pips

3.Likely outcome could be that you would win 50 trades and lose 50 trades

4.When taking into account the spread in the markets, you would lose between 3-4% of your bank, even if you had 50% winning trades.

Scenario 2

•Imagine you place 50 BUY trades and 50 SELL trades based on alerts from FOREX 4 U

•Your stop loss and take profit positions are not set equally, but based on technical analysis, with stop losses between 50 -70 pips and take profits at between 70-100 pips

•If you have the same success rate of 50% based on average stop loss of 60 pips and average profit of 85 pips = 

•losses of 50x60 = 3000

•Profits of 50 x 85 = 4250

Yielding a net profit of 1250 pips

Scenario 3

•Now imagine that we might just be a little more successful as we have the trading edge!

•So if we are 60% successful on our trades with an average profit of 87 pips per win trade and an average loss of 60 pips per losing trade – the same 100 trades yields this result:

•60 x 87 = 5220 profit in pips

•40 x 60 = 2400 loss in pips

•Yielding a net profit of 2820 in pips