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<rant>
I'm tired of reading in books/magazines/websites talk about "high probability setups" or "high probability trades" without ever publishing what the probabilities are. If you don't have numbers to support how high the probabilities are then don't say it's a high probability setup. And if you read that something is of a high probability demand to know what the probabilities are. They are hiding behind the excitement of potentially having a statistical advantage without performing or publishing any statistical analysis.
</rant>
I think the expression "High Probability" is a loose term used to describe a potential High Reward trade setup. The failure rate may be High even worse than 50%, say 33% but if the reward is 5 times the risk then for many it is considered as a high probability trade. The language used is bit streched but i think this is used in this context in the majority of the time, ie, a High Reward Setup that produces a positive expectation over the long term.
Good point. 'high probability trade' is one of the classic market cliches. Everybody uses it without ever substantiating. Another cliche I hate to see is 'take the guesswork out...'
The higher probability trades in a downtrend are in overbought zones as any short is vulnerable in oversold zones. Same is true in an uptrend, the higher probability trades in an uptrend are in oversold zones as any long is vulnerable in overbought zones.
Now the right question to answer is how do we identify these overbought/oversold zones ?
So many trading terms are subjective and the standard clichés are everywhere, from “overbought/sold” to “trend” to “retrace,” etc. I know it’s oftentimes difficult to quantify what exactly these mean, so in many ways trading really is an art more than a science, even though we are dealing with numbers and graphs
