An 87% win-rate trading strategy that actually works.
It was sent to me by one of you to see if it is really good.
So I tested it 100 times, and yes, it actually got a high win rate.
I’ll show you the interesting testing data in this video so you can decide if you want to get a high win rate or not.
But what is this 87% high win-rate strategy?
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Well, it gets a very high win rate by changing how you enter trades and size your positions.
In simple words, it takes your one entry point and turns it into three entry points.
And it splits your one position size into three sizes.
It basically makes you take structured entries!
What does that mean?
Let’s say you’re waiting for the price to give a long entry.
The price is moving up, and you’ve marked a support area at the previous swing high.
You think, as long as the price stays above this support, it’s an uptrend.
And if the price gives a good buy signal above this support, you’ll enter the trade.
But the price can give multiple buy signals.
We don’t know which one will actually work.
Yes, buying right at the support is the best setup.
But what if the price turns around before getting near the support?
You just missed out on some good profit.
We simply don’t know when the price will turn around exactly.
To fix this problem, the 87% win-rate strategy gives a structured way to enter the trade.
Instead of one big entry, we split our position into three parts and take three entries with the same risk.
And it works really well, as you’ll see in the testing data soon.
Here’s an example.
Let’s say you usually trade using the MACD indicator.
You buy when the MACD line crosses above the signal line and this happens below the MACD’s zero line.
You usually put your stop-loss below the pullback.
To keep it simple, let’s say you risk 3% on this trade at the stop-loss.
If the price goes up, we make money.
If it doesn’t, we lose 3% of the account.
Since we don’t know exactly when the price will turn around, taking every single buy signal above the support can lead to multiple 3% losses.
But in the structured strategy, when you get the first buy signal, you only risk 1% instead of the full 3%.
And you put your stop-loss where you’d put it for the best entry point.
What does that mean?
For example, the best entry in an uptrend is at the support because the price is more likely to reverse there according to data.
The stop-loss for that trade would be below the support.
So, even though we’re buying way above the support, we put the stop-loss at the best spot.
This stop-loss immediately increases the quality of the trade even though the entry isn’t at the best point yet.
And remember, we’re only risking 1% so far—that’s only a third of what you’d normally risk in this example.
Then, if the price goes down and MACD gives another buy signal, the 87% win-rate strategy says to take a second trade with another 1% risk.
The stop-loss goes at the best place again, below the support.
Here’s where it gets interesting.
Many brokers will combine your first and the second trade into 1 when you do this.
The new combined entry price will be the average of two trades, and it’ll be at a lower price than the first entry.
It’ll be like the first trade never happened and you only have one position at a better price.
The stop-loss will still be at the best spot, which is below the support.
At this point, it’s like you’ve taken a single trade with a 2% risk.
But what if the price goes down even more towards your support?
Well, now the price is at the best entry point.
When the MACD gives another buy signal, the strategy says to take the third and final entry.
The stop-loss goes below the support with a 1% risk.
Now, your broker will combine these three trades into 1 and show you an average entry price.
This average trade is your main trade and at a much better price than the first trade.
Since we took three trades in total with 1% risk each, the final averaged position has a 3% risk at stop-loss.
You can lower the risk if you want of course.
I kept the risk at 1% each to keep the math simple.
But that’s not where the structured entry strategy ends.
You see, normally, in a trend, many of us set the stop-loss below the pullback and use reward-risk ratios like 1.5 to 1, 2 to 1, and so on.
In a 1.5 to 1 ratio, the profit target is 1.5 times the stop-loss distance.
But since we’re setting the stop-loss at the best place from the start, using a high reward-risk ratio will make the profit target move way too far.
So, to keep the profit target at pretty much the same place, the strategy says to use a 0.25 to 1 reward-risk ratio on the first two trades.
This means the profit distance is 0.25 times the stop-loss distance.
On the third trade, you can use your normal bigger reward-risk ratio as it’s the best entry point.
Basically, in this structured method, you not only get to take two decent setups with smaller risks, but you also get to take your good setup with your usual risk.
But if the final average entry is too far up, maybe because the first two entries were taken way higher, then it’s better to use a 0.5 to 1 reward-risk ratio.
The profit distance is 0.5 times the stop-loss.
This will prevent the profit target from moving way too far.
In a long setup, it’s important to take the new structured entry below the previous one.
Otherwise, we are not making the entry price better.
Similarly, all new structured entries should be above the previous entries in a short setup.
Before I show you the 100 times testing data where it got an 87% win rate, here’s a quick summary:
It’s called a structured entry strategy because instead of taking one bad entry, we’re entering in a structured way.
We’re splitting the trade into three entry points.
You can also call this ‘structured averaging’ because you’re averaging your entry points into 1 better trade.
This gives us multiple chances of being right, which increases the win rate.
Since we set the stop-loss at the best place from the start, and since we use a lower reward-risk ratio on the first two trades, the probability of winning more times gets even higher.
I gave you an example of support resistance with a MACD crossover setup.
But this structured method can be applied to any strategy that gives multiple entries in the same setup.
For example, taking multiple long entries in the same pullback as long as the price is staying above the 200-period moving average.
The stop-loss goes below the moving average.
But to make sure the win rate isn’t high just because of the lower reward-risk ratio, and to make sure the structured entry is actually improving things, I did two separate tests, 100 times each.
One test without the structured entry strategy, and one with it.
I used the moving average version of this strategy, because manually drawing support resistance areas would have made things a bit biased.
I spent two whole days trying different indicator strategies to see which one would be the best for the testing.
And here’s the final strategy I used in the two tests.
I took 100 trades on the 30-minute timeframe.
I used MACD crossover to take the entries.
Usually, I use the 200 EMA to find the trend direction.
But this time, I used the 200 EMA of the 4-hour timeframe.
So, I’m taking entries with MACD on the 30-minute timeframe and using the 4-hour timeframe for the trend direction.
Why did I do this?
Because this way, I get to take multiple long trades in the same pullback.
In other words, I could find three structured trades more easily.
You obviously don’t have to use the higher timeframe moving average.
I just used it to make the testing easier.
When the price was above the higher timeframe 200 EMA, and the MACD line crossed above the signal line, and that crossover happened below the MACD’s zero line, I took a long entry.
I set the stop-loss below the 200 EMA.
When the price was below the 200 EMA, and the MACD line crossed below the signal line, and the crossover happened above the MACD’s zero line, I took a short entry.
I set the stop-loss above the 200 EMA.
If you are wondering why my 200 EMA has different colors, it’s because I’m using the free Trading Rush moving average I created a while back.
It’s a 200 EMA that tries to disappear in the range and slow market.
Since we are using a trend trading strategy in these tests, it’s perfect to filter out the range and slow markets without making things biased.
In the first test, since I was checking what the win rate would be like without the structured method, I took one trade like we normally do.
I didn’t take more trades until the previous trade had reached a profit or loss target.
In the first test, I used a 0.5 to 1 reward-risk ratio with 3% risk at stop-loss. Because this is what our structured method becomes after the third trade in the second test.
I tested this on the last four years of Bitcoin USD price movement.
The strategy can be used in any market, of course.
And after 100 trades, the strategy without the structured entry method got a win rate of approximately 73%.
It made around 28% profit on the account.
The break-even win rate of always using a 0.5 to 1 reward-risk ratio is around 67%.
So, this strategy was profitable.
There was around a 6% edge.
But now let’s see what win rate the structured entry method gets.
In the second test, I kept most of the strategy rules the same.
The new thing I did was apply the structured entry rules, which say to take up to three trades in the same setup.
Splitting the risk into three trades instead of risking all at once.
Using a 0.25 to 1 reward-risk ratio on the first two trades and using a 0.5 to 1 ratio on the third and final trade.
The green-red boxes you see on the chart show the final average entry price.
For example, if I took 3 structured entries, I only set the green red box on that final averaged entry price, with stop-loss and profit targets.
Don’t get confused if you sometimes see the entry price placed in the air, above or below the candle.
That’s just where the average price was.
In the second test, I was actually getting a better average entry price because of the structured method.
I only took a new structured trade if the new entry was actually going to make the average price better.
If the new trade entry price was similar or too close to the previous entry point, I avoided that entry.
I mean the whole point is to get a better entry price right?
No point in taking new trades if the average price is going to be pretty much the same.
On the other hand, you can get an even better average price if you increase the position size in a compounding way.
For example, in this test, I split the 3% risk equally.
Three trades had 1% risk each.
But if we risk something like 0.5% of the account on the first trade, 1% on the second trade, and 1.5% on the third trade, then the final average entry price gets even better.
The average price gets closer to the third entry price.
But then, using a lower risk on the first trade means you are going to make a lower profit if the first trade is won.
Which is not actually a bad thing if the first trade is supposed to be a lower-quality trade.
Risking small on low-quality trades is always a better move.
But making small profits when the first trade was won was kind of a disadvantage of this structured method in my testing.
It resulted in a slightly lower total profit than the first test.
But then again, this structured entry method is not an aggressive money-making strategy.
Its goal is to win more times by giving you more chances of being right.
And after 100 trades, the structured entry method got an 87% win rate, which is much higher than the previous one.
Since the reward-risk ratio was ranging between 0.5 and 0 point two five, the break-even win rate was between 67% and 80%.
So, this strategy had an edge of somewhere between 20% and 7%.
Since we used a 0.25 reward-risk ratio more times than the 0.5 ratio, the edge is probably more towards the 7% side, like around 10%.
But overall, yes, the structured method of taking trades does increase your win rate and can be attractive to anyone who is looking to win more times.
Winning more can be good for trading psychology.
The only main disadvantage is that you will make a slightly lower profit compared to a high reward-risk strategy.
But then, one can also take more trades to make more profit. So, it also depends on how you trade the “structured entry method.”
That’s all!