Looking for probability resources

Hey there,

My trading style is a mix of statistics (probabilities) and basic 'go with the trend enter on the dips' (Entry being at support and resistance levels)

It works pretty well, earn around 100-150 pips a month, but I'm trying to learn more about how it works.

I basically know before any trade what my probability of winning is, my take profit, my stop loss. Everything is planned from the get-go.

I'm only profitable though because I know the long run probability of each support/resistance pattern I trade (I combine this with money management).

I use the below formula

Expectancy of all trades = Average Win (Probability of a win) - Average Loss (Probability of a loss) - Spread

As long as Expectancy is a good deal above 0 (I like to allow lots of room for error) then I'm happy.

But I'd like to research this idea more, does anyone know any good threads, books or articles that specialise in this field? Maybe not so much on specific trading strategies but more focusing on the long run probabilities of different trading opportunities.

Cheers,
Scotty

p.s. If you don't think probabilities are the way to trade, I wish you all the best in your trades but this isn't the thread for a debate

Here is a good interactive thread....

http://www.forexfactory.com/showthread.php?t=274406


Regards,

Nader

Oh wikid, is there anything else? Especially books.

Well, I do have a book (Attached)...It's called "The Mathematics of Gambling"...Hope it's useful....


Regards,

Nader

cheers, I'm familar with this guys work though, absolute legend.

However to any reading his work please keep in mind the below

In games of chance you assume a normal distribution, which drastically underestimates the chance of black swan events which are so prevailent in markets.

Black swan events can include a long periods of drawdown, you must trade every day expecting one of these to occur. This includes developing a money management strategy to protect your account and having the confidence in your system to keep trading.

My worst drawdown so far has been 4 losing trades in a row a breakeven then another 2 losers. My account was smashed down around 45%, Took me several weeks to recover but I did.

Hi Scotty,

I noticed you from the other thread. You and I have similar math analysis of trading strategies. I have a book I read a few years ago, called the ultimate trading guide by john hill. He talks about different trading systems and running them through simulators to estimate the stats of winners vs losers. Also, if you create your own system, how you should backtest. what to look for, etc... But, it was a while back so I would have to dig it up to see exactly what was in the book.

It is on my other computer i think, but I can send you a pdf if I can find it. I will look for it and let you know if i can find it when I go home later this week.