As a former broker, I am almost certain that it wont take long for brokers to roll out updates. When FINRA first announced they were review the changes last year you better believe that Risk departments were already planning for it!
I've been out of the business since 2019, the industry moved at a snails pace back then, I was there when HOOD disrupted everything. They should have learned by now people aren't waiting anymore and the brokers that are first to market gets the bag!!
#FIINRA #morganstanley #brokerdealers
I decided to take your question serious so here is my response.
1) How often do outside bars happen?
Outside bars aka rejections of trend happen between 16% and 9% of the time depending on timeframe measured.
Which means you buy in the morning -> you come back to a HUGE loser about 10% of the time on the daily [if trading daily charts only]
2) So, how often do our reversals hit target?
BULLISH REVERSALS> NOT including outside bars against the position we see reversals hit target about 50-70% of the time [higher timeframes hit less often due to distance]
BEARISH REVERSALS> NOT Including outside bars against the position we see reversals hit target about 50-70% of the time.[higher timeframes hit less often due to distance]
BULLISH REVERSALS> INCLUDING outside bars against the position we see reversals hit between 37 and 50% of the time. [higher timeframes hit less often due to the distance]
BEARISH REVERSASLS> INCLUDING outside bars against the position we see reversals hit between 15 and 49% of the time. [higher timeframes hit less often due to distance]
These are true of any reversal that happens in the market. Since reversals are quantified by trend and trend is quantified by highs and lows [aka thestrat]
Since outside bars exist and they happen 19 to 21% of the time you are ALWAYS at risk of a broadening formation against you. Aka 'the losing trade you wish you closed sooner!'
And the 'broadening formation against you' is always the 'bigger move' of the timeframe you are trading.
This is why traders who do not know when and where to time the entries have a hard time no matter what strategy they are using, because trends can be rejected and because rejections are the bigger move.
Without knowing both trending and rejection conditions exist you get stuck on the wrong side when things turn! And without following my bio 'tight stops or get killed' you will have 19-20% of your outside bars against turn into HUGE losers. The only way to get rid of those is to use a tighter stop and a lower timeframe entry [so the lower timeframe '3' against you is smaller]