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Strategies & Market Trends : Classic TA Workplace
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To: IHateSourCream who wrote (126908)12/11/2005 8:55:27 PM
From: skinowski  Read Replies (2) of 209892
 
A little risk / benefit analysis:

Let's assume the probability of AMGN starting the 5th from this level ($78) is 40%.

The risk is $1

Wave 5 would be equal 62% of W3 at $92. The potential profit is $14.

$14 times 0.4 probability of winning = 5.16.

$1 times 0.6 probability of losing = 0.60.

5.16 minus 0.6 = 5.46.

This means that if I keep doing trades like this one, I should be able to make an average of over 5 points per trade. Sounds too good to be true, and probably is.... ;)

Of course, if the 5th will be only 50% of 3, the potential profit comes down to 3.4 points. I'll take it! -g
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