High/ Low Probability Trades in 2 Candle Theory | 2 Candle Theory Tutorial Series PART-3

In our last video, we saw how to trade a rejection trades. Now, we will see how high probability and a low probability trades based on two candle theory. Let's get into it. What is high probability and low probability trades? High probability trades are there is a higher chance that the trade would be ending in profit. Low probability is there is a lower chance that the trade may go right. Why this high probability and low probability we have uh determined is nowadays the market is too volatile. So, we cannot take all the trades in same quantity. So, what we will be doing is whenever there is a higher probability trades, the quantity would be bit higher. For lower trades, low probability trades, the quantity would be half of it. Okay? So, that it is very important to understand the higher probability and lower probability trades in two candle theory. So, what are the conditions for high probability trade? For high probability trade, the first condition is a volume. The volume should be an ascending volume. So, what is ascending volume is in two candle in two consecutive volume, the second volume should be higher than the first candle volume. Okay? So, whenever you have a consecutive volume with ascending volume, the probability is higher. The next one is a good candle formation. Here, the candle formation of this two candle should be a good candle. Means, there should not be a bigger wicks in any of the candle. The first candle would be a good full body solid candle and the second candle is a smaller uh body with a bigger wick. These things and all is a lower probability trades. So, when you wanted for a higher probability, the body of a candle should be a good solid body candle with lower wicks. The next one is RSI. So, as you all know the two candle theory, RSI should be below 80 for long and above 20 for short. In high probability, if the RSI is below 70, there is a higher chance you have more probability to go and hit the target. Or else, what happens if it is in 78 or 79, there is a very less chance after reaching 80 there will be one pullback and it will go down again. So, when you are checking for RSI for higher probability trade, always check for long condition, RSI should be below 70 and for short condition, RSI should be above 30. Okay? The next one is a open interest. When you're checking for two candle theory along with open interest, you will have a higher probability. So, what is meant by open interest higher probability is, when you're checking open interest for example, you're checking open interest in trending OI. So, in trending OI, continuously there should be a trending OI difference in OI should be continuously breaking a day's low and along with that, you will have a two candle theory. So, when both are lining up together, you will have a higher probability. Now, let's see what is low probability trade. Low probability trade is same opposite of a high probability trade. So, volume, if it is not in ascending, if it is in descending volume, means the volume of a first candle is higher and the second candle is lower, it is a low probability volume candidate. Next one is a candle formation. So, in low probability, the first candle would be a full body candle and the second candle will have a smaller body with a bigger wick. This is a lower probability candidate. You cannot trade a bigger quantity in this kind of candle formation. Next is a RSI. In low probability, if RSI is above 75, the chances of moving higher is bit lesser in long condition. And if the RSI is below 25, the probability of going down is bit lesser. So, in low probability, if the RSI is above 75 for long condition, you should avoid bigger quantities. And on downside, if the RSI is below 25, you should avoid a bigger quantities in downtrend. Next, open interest. You are getting a two candle theory and candle body and everything is very good formation. But when you check open interest, you are getting a two candle theory on call side and the open interest still is on bearish side, you have to wait for open interest also to match your line. Or else, it will have a lower probability trade. So, if you are a one lot trader, always try taking trades in high probability trades only. That too, a rejection trades. And if you are a person who is averaging and taking trades, you can take a low probability trade with a lesser quantity and high probability trade with a higher quantity and you can average higher probability trades and you can stop averaging when it is a lower probability trade. We will see few examples of high probability and low probability two candle theories. So, in this example, you can see it is a high probability trade. The volume is ascending and RSI is below 75 and everything is matching with the data. And you can check a trending OI as well. Trending OI is also supporting us. So, this is a high probability example. Next one is a low probability. In this example, you can see the candle formation and a volume everything is on opposite to a higher probability trade. Okay, so this is a exact low probability candidate. In this example, you can see you bought a two candle theory after 10:00. That is fine, but if you check the volume, the first candle is 108 volume and the second candle is 57 volume. So, the volume is descending. So, this is a low probability candidate. So, we would have entered in a third candle, but with a half the quantity. And if you are a non-average player, you would have avoided this trade itself. And exactly you can see there is no any much movement. We would have exited somewhere here as a scalper, but the market did not move up because it is a low probability trade. In this video, we saw what is high probability and low probability on two candle theory. In next video, we'll see how to do an averaging in two candle theory. Hope you have learned something new in this video. Thank you for watching. Stay tuned for more updated videos. Keep learning and earning.