Following on from the previous post about magnetic price points in trading, it’s time to consider the opposite situation: do you know of a price level where price is likely to not go? We will call this a Repellant Price Point.
You may have researched an edge and built some statistics, only to find that something has a very low probability of occurring.
These kind of statistics are often thrown out as ‘useless’ or ‘junk’ when backtesting stats, because they aren’t ‘high probability’, but they can be…
You need to think outside the box.
When trading, or through backtesting strategies, you may have found hints. An example would be a reliable statistic for an area which price only manages to touch 20% of the time. This can be a very powerful piece of confluence for a trade idea.
Entering short with your stop above the repellant price point, you’ve increased your chances of having a winner. You now know the probability of the stop being hit. (This isn’t to say it will necessarily snap back to a huge target, but you can improve the odds of a simple mean reversion trade)
Track all of your trades as usual, but add a column to check for certain stats. You can then find out if trades taken past certain pivots or ATR have a higher expectancy or winrate.
You may find that short trades taken above the R3 pivot have a higher win rate than shorts inside R3. This is powerful information.
But you may find the converse to help as well. Perhaps short trades below the S3 pivot are rarely winners because price has already extended so far.
If this is the case you can stop yourself from taking as many low probability trades.
This is an easily actionable way to improve the success rate of good trades. At the same time it can potentially keep you out of low probability trades. If you know the odds of your repellant price point.