Increasing the Probability of Take Profit with the EasyTakeProfit Utility

Hello, fellow forex traders! You have all surely heard that the exit point from a position is much more important than the entry point. Many beginner traders periodically have difficulties placing stop losses and defining targets for open positions. Some exit positions earlier than they should, thereby violating the desired profit-to-loss ratio, while others set unrealistic profit targets and wait for the market to deign to reach them, which also leads to sad results.

Also, most beginner traders have problems with setting a stop-loss. Most often they fall into two extremes: either a stop that is too small because of unwillingness to lose more, or a stop that is too large, or even its complete absence.

Today we will look at the EasyTakeProfit expert advisor, designed to help beginner traders set targets and limits correctly. Put simply, the advisor shows recommended areas for placing take profit and stop loss.

Placing stop levels "well out of harm's way" reduces the chances of them being hit, whereas placing take profit closer to the entry point increases the chances of making a profit before the price breaks the stop-loss.

The reason for this is quite simple: at any given moment, the price moves up and down within a certain range typical for the instrument, regardless of the presence of a trend or anything else. If the stop-loss is relatively close to the starting level, there is a high probability that the price will break it. In principle, the market likes to throw "spikes," consolidate, and move along the stop-loss level, staying very close to it and posing a serious danger of breaking it. The market also likes to test levels and previous extremes, beyond which stop losses are, as a rule, very often placed. By placing stop-losses outside this expected range, traders can keep the stop-loss at a safer distance, reducing the probability of a loss. Nevertheless, it is worth remembering that any signal from your trading strategy may turn out to be losing, but placing the stop outside the range will protect the position from random price noise.

If the stop-loss is not located very close to the price and there is no possibility of it being hit at any moment, such trading actually has serious chances of ending with a profit.

To determine this range, the ATR volatility indicator (Average True Range) is used, invented by J. Welles Wilder for the commodity markets.

The winning traders who participated in the study used the average true range (ATR), as a result of which it was established that:
1. The probability of breaking the stop-loss level decreases sharply if in the ATR indicator we use a multiplier from 7 to 12;
2. The probability of breaking the take-profit level increases significantly if in the ATR indicator we use a multiplier from 4 to 8.

Using the ATR indicator, a trader can place the stop-loss level outside the expected range, and the take-profit level inside the expected range; in this case, it is possible to significantly increase the chances of profitable trading.

In other words, stop losses should be placed so that the probability of their being hit is low, and vice versa for take-profit levels. The EasyTakeProfit expert advisor performs the necessary calculations according to this theory and marks zones for taking profit and placing stops on the chart.

As you have probably already understood, according to this logic the ratio of average profit to losses will be less than one, that is, the gain in each trade will be smaller than the loss. At the same time, the probability of reaching the take-profit level increases and the probability of taking a loss on the trade decreases, thereby increasing the number of profitable trades. This method of determining targets and limits is excellent for working intraday, where sudden price movements against the position are commonplace.

There is no need to be afraid of a profit-to-risk ratio below one; this is how things are in many scalping trading systems. On longer periods, for example on daily charts, this methodology works noticeably worse.

The expert advisor is installed according to the standard instructions into the \MQL4\Experts folder. There is only one parameter in the settings: the scale of the control buttons.

Using the expert advisor is extremely simple: just press the button corresponding to the position being opened, and zones for placing the stop loss (orange color) and take profit (green color) will appear on the chart. The boundaries of these zones are calculated from the current price in accordance with the idea set out above: for the stop loss, for example, the zone will begin at a distance of 7 ATR values from the current price and have a thickness of 5 values. The stop loss is set anywhere within the orange zone, and the take profit within the green zone.

The EasyTakeProfit expert advisor noticeably makes it easier to find the best places with a high probability of profit for closing positions in intraday trading. It is quite convenient and informative, easy to use, and the absence of settings makes using the advisor understandable for any beginner.  Nevertheless, this method must be used wisely. The advisor will not save you from blowing your deposit when trading a losing strategy or making spontaneous entries "out of nowhere", but it is fully capable of improving an existing profitable intraday trading system.

Sincerely, Dmitry aka Silentspec TradeLikeaPro.ru