Probability Ratio


#1

I was going through the simulator part of the binary scanner course, and you stated in the video that you shouldn’t necessarily choose the pair with the best risk/reward, but choose the pair with the best probability ratio. I may have missed what you said but how exactly do you do that?

Is the best probability ratio a pair that is ATM, a number you can calculate or what? Now I know that I’ve just joined and I haven’t gone through any of your strategy courses yet, so maybe my question on determining probabilities will be answered there, but from just using the binary scanner how do determine what the probability ratio is for a possible trade?

Thanks in advance.


#2

sragone, When looking at multiple binaries, you may have an OTM ( out of the money) binary that has the best risk / reward ratio. Meaning to buy a $10 binary that “could” expire ITM and be worth $100 is a better return than buying a binary at $90 that expires at a value of $100. BUT, you have to look at how far the market has to move, within a set amount of time before expiration for that $10 binary to expire ITM ( In The Money) So, yes, you have a better return on the $10 binay IF profitable, but you have a much higher probability of the $90 one expiring ITM, since it is ALREADY ITM. So you can not JUST choose a binary based on the possible reward. You have to know which binary has the best probability of being ITM while at the same time having a good risk / reward, so it has to be a combo of the two. With binaries you can almost look at the price a probability. If you have a $5 binary, it is like having only a 5% probability of it expiring ITM. Because the market HAS to move up far enough and stay up for that binar to reach the strike price. If you are buying a binary at $80, it is like having an 80% probability. The marker can go up, stay flat, or even go down a little and still expire profitable. So again, you must have a combo of the 2, know the direction of the market, and the expected movement of the market based on the systems that you are using. This will all come together and make more sense as you go through some of the strategy and system Training Courses