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ROULETTE STEP 2
Determine the probable distance the market will go in that anticipated
direction.
This is the crucial step. Picking the direction the market will move in is
relatively easy to accomplish from “step 1”. The tricky part is anticipating
whether it’ll go far enough for your trade to exit with profit.
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There is no point doing a “Forex Roulette” trade for ten thousand pips
(10,000) as it could take a very very very long time for that to happen (if it
will happen at all), meanwhile you are getting eaten alive by the daily interest
rate, or even if you are profiting from daily interest then chances are you
could be losing much more against the position.
If, for example, you are trading along a trend that is within a larger scale
consolidation, wouldn’t it be stupid to shoot for a target profit that falls
outside of that larger scale consolidation? Or if you’re trading along a trend
that is part of a larger scale Fibonacci retracements then you certainly
wouldn’t look to place your target limit beyond the “golden ration” of 62%.
It is important that you look at the bigger picture charts to see what is a
realistic possibility for your trade to be able to reach. If there are key price
levels on the larger charts that would indicate reversal points (i.e.
consolidation lines, trend lines, Fibonacci levels, triangle boundaries, or
support/resistance of any kind) then be sure to keep your target profit limits
well within those prices.
Here is also where you look at the “Usual Maximums” that you learned about
in the section explaining “ATR”. The purpose of looking at the Usual
Maximums, and the average moves is to determine the likelihood of the
market moving your required amount of pips in a reasonable amount of
time. If your usual daily maximum is say 200 and you are going for a target
of 300 pips then don’t hold your breath on your trade lasting for just one day
in duration; most likely it’ll take several days.
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Knowing the above-mentioned limitations you look for what is probable
distances for your trade to accomplish. Then scale down the probable
distance to a conservative distance that you feel rather confident that your
trade should reach with relative ease. You want, with the “Forex Roulette”
method, to go for the trades that appear to be “sure things”, not “pie-in-thesky”.
The more probable your trades are then the better will be your success
ratios, and the more profitable you will be overall using this technique.
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