Are the Odds Against Your Trade?

by | Apr 27, 2025 | Chart of the Week Past

In this Educational Chart of the Week Below,  

We Review: Are the Odds Against Your Trade? Below is a Checklist!

This Wednesday - Why Volume is Secondary... Until it Matters Register Here

The Master Trader top-down method of stock market analysis is a comprehensive approach that starts with a Techno-Fundamental perspective and narrows to individual stocks.

Master Trader uses a Top-Down method to educate students through courses and letter memberships

Are the Odds Against Your Trade?

In trading and investing, spotting a recognizable price pattern is like discovering a secret map to future profits. Patterns like flags, head and shoulders, double tops and bottoms, and others can suggest where prices will likely move next. But the real question is — how do you properly assess the odds that the trade is highly likely to work?

If you focus only on the pattern without considering the bigger picture, you’re stacking the odds against your trade, not in your favor.

These Basic MT Patterns are Starting Points - They are NOT Trading Strategies

Let’s walk through what you should be weighing before pulling the trigger:

Price Pattern vs. Reward-to-Risk

The first question to ask yourself isn’t just, "Is this a good pattern?”  And. "What’s my potential reward compared to my risk?"
You can have a textbook-perfect pattern, but it doesn't make sense if the reward-to-risk ratio is skewed (like risking $3 to make $1).
Professionals aim for setups where the potential reward is at least two times the risk, ideally more.  

Pattern vs. Trend

How does the pattern fit into the bigger trend?
Patterns that align with the broader trend have much higher odds of success. A bullish pattern forming in an uptrend? That’s a green light.
Is a bullish pattern trying to form inside a downtrend? That’s a yellow (or even red) light. It could be a trap. Climatic Patterns offer higher odds of rebounding if you take patterns that go against the trend, but with tighter management.

Examples of real trading patterns with multiple trading concepts are reviewed weekly here.

Pattern vs. Distance to Support or Resistance

Even if the pattern looks great and the trend is supportive, you must consider your position in relation to key support and resistance levels.
If you’re buying right under major resistance, you're walking into a buzzsaw.
If you're shorting right above major support, same story — you're betting against a level that's likely to attract buyers.

The closer prices are to a significant obstacle, the less room there is for your trade to breathe. You want enough open space – a VOID between your entry and the next major barrier to allow the trade to unfold naturally.

Trading Education and Lessons Every Week!  Click Here

Pattern vs. Trend and Distance to Support or Resistance

MT Traders layer these factors together:

  • Is the pattern aligned with the trend?
  • Is there sufficient distance to support or resistance?

When all three line up — a good pattern, trend alignment, and room to move — odds shift dramatically in your favor.

That's what you should be hunting for consistently, and the focus of Master Trader Letters and the Green Room daily.

Trading Education and Lessons Every Week!  Click Here

Why choose Master Trade for your Financial Future?

Let’s continue to walk through what you should be weighing before pulling the trigger:

Pattern vs. Trend, Distance to Support or Resistance, and Major Moving Averages (50 or 200)

Finally, add one more edge layer: major moving averages, like the 50-day and 200-day.
These aren’t magical lines, but institutions and funds widely monitor them, which makes them significant on psychological and technical levels.

  • A bullish pattern above the rising 50- or 200-day moving average has better odds than one battling below a declining average.
  • A bearish pattern below a falling 50- or 200-day? That’s a high-probability setup for the short side.
  • A bullish pattern below a falling 50-day and 200-day, unless climactic, is a low-odds long trade.
  • A bearish pattern above a rising 50-day and 200-day, unless climactic, is a low-odds short trade.

Fighting against the slope and position of these major moving averages can feel like trying to swim upstream. You may win a few, but over time, the odds will grind against you.

Your Master Trader Thought

A Price Pattern alone is never enough.
The context around the pattern determines the real quality of the trade.

Train yourself to evaluate every set-up like a professional: reward-to-risk, trend alignment, proximity to key levels, and interaction with major moving averages.

The more MTS Concepts that are working for your trade, the more the odds are with you, and that’s the only way to win in this business consistently.

Master Trader and You Building Your Financial Future Together!

Happy trading!  If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com