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High Probability Trading Strategies

High Probability Trading Strategies

Entry to Exit Tactics for the Forex, Futures, and Stock Markets
by Robert C. Miner 2008 288 pages
3.74
100+ ratings
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Key Takeaways

1. Multiple Time Frame Momentum: The Foundation of High Probability Trading

Trade in the direction of the larger time frame momentum; execute following a smaller time frame momentum reversal.

Dual Time Frame Approach. The Multiple Time Frame Momentum Strategy forms the bedrock of high probability trading. This approach combines the momentum of two time frames to identify optimal trade setups. The larger time frame (e.g., daily) determines the overall trend direction, while the smaller time frame (e.g., hourly) pinpoints precise entry points.

Key Components:

  • Larger time frame momentum: Determines trade direction (bullish or bearish)
  • Smaller time frame momentum: Signals trade execution
  • Overbought/Oversold conditions: Provide additional context for trade decisions

By aligning multiple time frames, traders significantly increase their odds of success. This strategy filters out noise and reduces false signals, leading to more reliable trade setups across various markets and time frames.

2. Pattern Recognition: Identifying Trends and Corrections

Overlap is the key to identify a correction.

Trend vs Correction. Understanding market structure is crucial for anticipating future price movements. The key distinction lies between trends and corrections. Trends typically consist of five waves without overlap, while corrections involve overlapping waves.

Pattern Guidelines:

  • ABC Corrections: Minimum three-wave structure
  • Five-Wave Trends: Follow specific rules for wave relationships
  • Overlap: Primary indicator of a corrective pattern

Recognizing these patterns allows traders to position themselves for high-probability trades at the end of corrections or trends. This knowledge, combined with other technical factors, provides a powerful edge in predicting market reversals.

3. Dynamic Price Strategies: Beyond Traditional Fibonacci Retracements

Most corrective highs and lows are made at or very near one of the four key internal retracements.

Advanced Price Analysis. Dynamic Price Strategies elevate traditional Fibonacci analysis by incorporating additional ratios and projection techniques. This comprehensive approach helps identify precise price targets for trend reversals and corrections.

Key Components:

  • Internal Retracements: 38.2%, 50%, 61.8%, 78.6%
  • Alternate Price Projections: 61.8%, 100%, 162%
  • External Retracements: 127%, 162%, 262%

By combining these tools, traders can pinpoint high-probability price zones for trade entries and exits. The confluence of multiple price projections often creates narrow target ranges, increasing the precision of trade decisions.

4. Market Timing: Advanced Techniques for Predicting Reversals

When time is up, change is inevitable.

Dynamic Time Strategies. Timing is a critical, yet often overlooked, aspect of trading. Dynamic Time Strategies provide a framework for anticipating when market reversals are likely to occur, complementing price-based analysis.

Key Time Factors:

  • Time Retracements: Similar to price retracements, applied to time
  • Alternate Time Projections: Project future time targets based on past swings
  • Time Bands: Identify high-probability time windows for reversals

By incorporating these time-based tools, traders can refine their entry and exit points, often anticipating major market turns with surprising accuracy. This multidimensional approach to market analysis significantly enhances the probability of successful trades.

5. Entry Strategies: Objective Rules for Trade Execution

Never buy or sell at a target price. Always require the market to move in the direction of the anticipated trend to execute a trade.

Objective Entry Rules. Removing emotion and indecision from trade execution is crucial for consistent success. Two primary entry strategies provide a systematic approach to entering trades once high-probability conditions are identified.

Entry Strategies:

  1. Trailing One-Bar Entry:
    • Enter on a breakout of the previous bar's high/low
    • Initial stop placed beyond the recent swing high/low
  2. Swing Entry:
    • Enter on a breakout of a significant swing high/low
    • Often provides larger profit potential but with wider initial stops

These objective entry rules ensure that trades are only executed when the market confirms the anticipated direction, reducing the risk of premature entries and false breakouts.

6. Position Sizing: Protecting Your Capital and Maximizing Returns

Three percent maximum capital exposure on any one trade and 6% maximum exposure on all open trades is the accepted standard, and it is a good one.

Capital Preservation. Proper position sizing is a cornerstone of successful trading, often separating profitable traders from those who blow out their accounts. The key is to limit potential losses while allowing for substantial gains on winning trades.

Position Sizing Guidelines:

  • Maximum 3% capital exposure per trade
  • Maximum 6% total capital exposure on all open trades
  • Calculate position size based on entry price and initial stop level

By adhering to these rules, traders can withstand a series of losses without significant damage to their trading capital. This approach allows for consistent trading over the long term, even with a relatively low win rate.

7. Exit Strategies and Trade Management: Maximizing Profits and Minimizing Losses

Always let the market take you out by moving against the position. Do not exit at a predetermined price target.

Dynamic Trade Management. Effective exit strategies and trade management are crucial for maximizing profits and minimizing losses. A flexible approach, based on market conditions, often yields better results than rigid, predetermined exit rules.

Key Principles:

  • Use trailing stops based on market structure
  • Implement a multiple-unit approach (e.g., two units per trade)
  • Adjust strategy as new market information becomes available

By managing trades actively and allowing profits to run, traders can capture a significant portion of major market moves while still protecting their gains. This approach balances the need for capital protection with the opportunity for substantial profits.

8. The Business of Trading: Developing a Comprehensive Trading Plan

Every consistently successful trader has a written trade plan. Most unsuccessful traders do not have a written trade plan.

Trading as a Business. Approaching trading as a serious business venture is essential for long-term success. This mindset shift involves developing a comprehensive trading plan, maintaining detailed records, and continuously evaluating and improving performance.

Key Elements of a Trading Business:

  • Written trading plan with specific rules and guidelines
  • Regular review and analysis of trade performance
  • Continuous education and skill development
  • Proper risk management and capital allocation

By treating trading as a business, traders can overcome many of the emotional and psychological challenges that often lead to failure. This structured approach provides a framework for consistent profitability and long-term success in the markets.

Last updated:

FAQ

What's High Probability Trading Strategies about?

  • Comprehensive Guide: High Probability Trading Strategies by Robert C. Miner is a detailed guide that covers trading strategies from entry to exit, focusing on high probability setups in Forex, futures, and stock markets.
  • Four Key Factors: The book emphasizes momentum, pattern recognition, price, and time as essential elements for making informed trading decisions.
  • Practical Application: It provides specific strategies for identifying trade conditions, entry and exit points, and managing trades effectively, suitable for both novice and experienced traders.

Why should I read High Probability Trading Strategies?

  • Proven Techniques: The author, with over 20 years of experience, offers refined strategies to help traders achieve consistent success.
  • Unique Perspective: It introduces a unique approach to using multiple time frame momentum strategies, which are not widely utilized by traders.
  • Educational Resources: The book includes a CD with video examples, enhancing the learning experience by showing the strategies in action.

What are the key takeaways of High Probability Trading Strategies?

  • High Probability Setups: Learn to identify conditions that lead to high probability trade setups, focusing on minimizing capital exposure.
  • Dynamic Strategies: The book teaches how to project price and time targets for trend reversals, crucial for effective trade management.
  • Versatile Application: The strategies are applicable across various markets and time frames, making them adaptable to different trading styles.

What is the Multiple Time Frame Momentum Strategy in High Probability Trading Strategies?

  • Key Trading Filter: This strategy filters trade direction and execution setups by analyzing momentum across different time frames.
  • Trade Direction: It involves trading in the direction of the larger time frame momentum while executing trades based on reversals in the smaller time frame.
  • Enhanced Success Rate: Aligning both time frames increases the likelihood of successful trades.

How does High Probability Trading Strategies define high probability trade conditions?

  • Four Main Factors: High probability trade conditions are identified through momentum, pattern recognition, price levels, and time factors.
  • Trading Edge: When all four factors align, traders gain a significant edge, increasing the chances of a successful trade outcome.
  • Objective Criteria: The book emphasizes objective criteria for making trading decisions, moving away from subjective interpretations.

What are internal and external retracements in High Probability Trading Strategies?

  • Internal Retracements: These are price levels (38.2%, 50%, 61.8%, and 78.6%) used to identify potential targets for corrections within a trend.
  • External Retracements: Projections greater than 100% (127%, 162%, and 262%) help identify the final section of a trend or correction.
  • Practical Application: Both types are crucial for determining where corrections may end and for setting up trades in the direction of the prevailing trend.

What is the significance of the ABC correction pattern in High Probability Trading Strategies?

  • Common Structure: The ABC correction is a frequent pattern consisting of three distinct swings, providing a framework for identifying potential reversals.
  • Price Target Projections: The book outlines how to project price targets for the end of an ABC correction using internal retracements and alternate price projections.
  • Trading Strategy: Recognizing an ABC correction allows traders to position themselves for potential reversals, enhancing their trading strategies.

How does High Probability Trading Strategies address market timing?

  • Dynamic Time Strategies: Introduces methods for projecting time targets for trend reversals, moving beyond traditional cycle analysis.
  • Time Retracements: Emphasizes the importance of time retracements, which help identify when corrections are likely to complete based on historical data.
  • Narrowing Time Targets: Using alternate time projections, traders can narrow down potential time targets for reversals, improving trading accuracy.

What are the entry strategies discussed in High Probability Trading Strategies?

  • Trailing One-Bar-High/Low: Enter a trade one tick above the high (for long trades) or below the low (for short trades) of the last completed bar.
  • Swing Entry: Requires the market to take out a recent swing high or low before entering a trade, confirming trend direction and reducing false breakouts.
  • Objective Execution: Both strategies are designed to be objective, allowing traders to execute them without emotional interference.

How does High Probability Trading Strategies address risk management?

  • Capital Preservation Focus: Emphasizes preserving capital by limiting risk on each trade, recommending a maximum exposure of 3% per trade.
  • Position Sizing: Provides guidelines for calculating position size based on initial capital exposure and account size to avoid over-leveraging.
  • Stop-Loss Strategies: Discusses various stop-loss strategies to protect profits and minimize losses, adjusting stops based on market conditions.

What are the exit strategies outlined in High Probability Trading Strategies?

  • Trailing Stops: Recommends using trailing stops to lock in profits as a trade moves in the desired direction.
  • Objective Exit Conditions: Exit strategies should be defined before entering a trade, based on the same conditions that justified the entry.
  • Multiple-Unit Exits: Advocates for trading multiple units, exiting one at a short-term target while holding another for longer-term objectives.

What are the best quotes from High Probability Trading Strategies and what do they mean?

  • "You can’t buy success": Success in trading comes from knowledge, experience, and hard work, not from relying on automated systems or software.
  • "Identify conditions with a high probability outcome": Highlights the core objective of equipping traders with skills to recognize favorable trading conditions.
  • "Trade for points, not for ticks": Advises focusing on longer-term trends and larger price movements rather than small, frequent trades.

Review Summary

3.74 out of 5
Average of 100+ ratings from Goodreads and Amazon.

High Probability Trading Strategies receives mixed reviews, with an average rating of 3.74/5. Many readers praise it for providing valuable insights into market analysis and trading strategies, particularly for intermediate traders. Some found it transformative for their trading approach, while others appreciated its practical tips on entry, exit, and trade management. However, critics argue it lacks comprehensive coverage of important topics like broker selection and backtesting. Some also question the effectiveness of the strategies long-term and criticize the reliance on Fibonacci retracements. Overall, readers found the book's emphasis on discipline and trading plans beneficial.

Your rating:

About the Author

Robert C. Miner is a professor of philosophy at Baylor University and the author of "High Probability Trading Strategies." While his academic background is in philosophy, Miner has made a significant impact in the field of financial trading through his book. The work draws on his expertise to provide traders with strategies for analyzing markets and making informed decisions. Miner's approach combines technical analysis, pattern recognition, and market timing techniques. His book has gained recognition among traders for its practical insights and comprehensive trading plan methodology. Despite some criticisms, Miner's work has influenced many traders' perspectives on market analysis and trading strategies.

Other books by Robert C. Miner

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