Let’s approach trading profitability from first principles.
After 10 years of live trading, I’ve been thinking deeply about how to build a logic-based, probabilistic trading model — and finally have a clear problem statement.
📌 But before jumping into solutions, I want to ask:
Does this problem statement make sense?
If we solve it, does it logically lead to a profitable edge?
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🧩 The Setup: 5 Variables and 2 Rules
We are trading in any liquid market: CFDs, stocks, crypto, etc.
🎯 The 5 Variables:
• X = Entry level
• Y = Take profit level
• Z = Stop loss level
• P = Probability that price hits Y after X → P(Y | X)
• L = Probability that price hits Z after X → P(Z | X)
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✅ Rule 1:
|X – Y| > |X – Z|
→ Ensures a Reward > Risk (R:R > 1)
✅ Rule 2:
P(Y | X) > P(Z | X)
→ Ensures Target is statistically more likely than Stop
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🧠 The Problem Statement:
Find combinations of (X, Y, Z, P, L) that satisfy Rule 1 and Rule 2.
If both are true, the setup has positive expected value:
EV = P(Y | X) × |Y − X| − P(Z | X) × |X − Z| > 0
That’s it — clean, testable, logic-based.
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Would love your thoughts.
• Does this problem definition hold up mathematically?
• Would solving this system — even partially — lead to a trading edge?
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