Retracement filtered by trend length

I’m sure this is something that I’ve done before, but I don’t think I realized the implications of it so I’ve redone it.

In a given 3 wave progression off of a trend, a trend move is likely to be followed by a spring wave (68%) or an expansion wave (32%). This means no matter your stop, you have a 32% chance to lose the trade. Given the easiest and highest density areas to enter, this makes for terrible R:R

trend progression

I’ve come to think that the wave length, although it has issues of being arbitrary (is 100 pips now the same as 100 pips 10 years ago?), is still important. I broke up the sets into 50 pip bins to hopefully get rid of some of the possible change to the value of a single pip over time.

trend wave retracement

Not a whole ton to learn from this since one should already expect that small waves are more likely to expand rather than contract, but as usual, it’s nice to know where the breaks are.


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