Risk Probability Calculator - Continued...
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February, 2004
By Sure-Fire Forex Trading

In our next example of the 1-minute Dow Jones Point A is 7.916.08 and point B is 7.877.70. If you calculate the 38.2% retracement you get 7892.36, the 50% retracement is 7896.89 and the 61.8% retracement is 7901.42. For example. The difference between 7.916.08 and 7877.70 is 38.38, if you calculate 61.8% of that you get 23.72. If you then take 23.72 and add it to Point B of 7.877.70 you get 7901.42 the 61.8% retracement. The only difference between the downtrend and the uptrend is that you add your calculations to Point B and in the uptrend you subtract from Point B.

So how can we use all this information? Well, this is where the RPC comes in. The RPC calculates expansion ratios once Point A, Point B and Point C has been formed. These expansion ratios will give you likely targets, which you use to exit the trade.

Before we gone to the RPC calculator it is important that you consider the purpose of the RPC. It is a tool to help you with money management. Essentially you can only make money trading if you make more than you lose.

You could have a method which has an edge! Or you could have a method where your winners greatly outweigh your losers. The point of the RPC is to help you identify trade that have at least twice the potential gain to loss (sometimes called RRR - Risk Reward Ratio).

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