Risk wave vs profit wave (the 80/20 rule)

Core idea

Among the thousands of waves the market creates every day, roughly 80% are risk waves (no evidence) and only 20% are profit waves (with a pattern, with buying/selling power already prepared). A trader's goal #1 is avoiding risk; goal #2, only after that, is seeking profit — nail goal #1 and goal #2 comes on its own. The one filtering criterion: does this wave originate from that exact timeframe's own pattern?

Details

The mantra

"The market is always full of risk, and risk is always many, many times more common than profit. So goal number 1 is avoiding risk; goal number 2, only after that, is seeking profit."

What a profit wave looks like

• That timeframe has a pattern: RSI goes to an extreme then gradually narrows its distance from the two moving averages → that's the process of accumulating buying/selling power, and also the process of the market's psychology alternating (fear reaches an extreme → gradually shifts toward positive).
• That timeframe's current trend originates from its own prior pattern.
• You can clearly see the entry point, the risk point (SL), and the target.

What a risk wave looks like

• Before this, the timeframe was ranging, with no pattern, then suddenly RSI opens downward/upward and runs.
• → The decision doesn't sit on this timeframe; it's only being dragged along by another timeframe (when price moves, every timeframe moves).
• Consequence: you can't identify which timeframe's wave this is → no entry point → no risk point → no benchmark for the target. Trading into that is "bringing home risk in the truest sense."

Why winning once is actually more dangerous

If you're lucky enough to win on a risk wave once, you'll apply that exact same style of trading to future trades and lose the other 9 times. That's how a single lucky win destroys an entire system.

A self-test

At the end of the month, open your trading journal and split it into two groups:

• Group A: trades entered because of clear analysis.
• Group B: trades entered because you couldn't hold yourself back, with no evidence.

Sum Group A's profit separately → almost everyone who does this exercise is shocked: Group B's number has wiped out all of Group A's profit.

The principle of "building more reasons NOT to enter than reasons to enter"

Before every opportunity, the number of reasons to say NO must outnumber the reasons to say YES. If your mindset is "hey, is there any setup I can jump into," with both hands always ready to throw money into a market that is 80% risk, then your loss rate is inevitably 80%.

Two images the teacher often uses

• The mackerel fisherman: the company only buys mackerel. A greedy fisherman catches whatever fish he sees → 80% of the hold is trash fish, only 20% is mackerel → more effort for a much smaller haul than the fisherman who focuses only on catching mackerel.
• Hunting, not spraying an AK: raise your rifle, and if the target is hidden behind a tree, lower it; if it steps out of your sights, lower it — only pull the trigger when every factor lines up within the bullet's controlled path.

Splitting the 80% risk into 20% "smells off" + 60% MURKY

This is the sharpest later refinement of the 80/20 rule: the 80% risk waves aren't uniform, and its two halves are dangerous in two completely different ways.

Most of the losses suffered by people who have knowledge fall in this 60% group — this is exactly where the money made on clean waves gets bitten back out of you. It doesn't kill with one big blow; it kills with a string of small ones.

The sign that you're standing in the 60% group: on timeframes from H4 and below, RSI is hovering around 40–60, no trend, messy accumulation → no evidence. Trading at that point means low profit margin (resistance levels everywhere) with high risk — a gamble in the truest sense.

Two blocking rules that go with this:

1. No pattern, no analyzing just for the sake of it. Discussing hundreds of messages in the group chat with no evidence is exactly working yourself up into entering a trade (Timeframe consistency (the profit-generating strategy), item 10).
2. Losing money despite having knowledge usually comes from having the wrong timeframe's expectations: entering on 5m/M15 then holding as if you were holding H4. Whatever timeframe you entered on, manage the trade by that timeframe; if the small timeframe can't pull the big one along, close it.

The time ratio of this profession, the teacher says plainly: 80% is waiting and researching, and only 20% is making the decision. The image the teacher uses for the 60% group: it's the casino you have to walk out of — and walking out, nobody's going to laugh at you.

The original name of this framework: "THE 226 RULE"

The 20/20/60 framework above isn't a relabeling I made up — the teacher has his own name for it and repeats it across many sessions: "the 226 rule" (i.e., 2–2–6, corresponding to 20% – 20% – 60%). Here is how the teacher explains it, verbatim, in one session:

• 20% of cases are a clear opportunity → certain to win.
• 20% of cases are clear risk → certain to avoid, anyone can see it.
• The remaining 60% is timeframes crossed against each other, which is essentially a 50/50 state.

A further point the teacher stresses in one session: it's exactly within that 60% group that people are highly prone to bias based on the evidence they already have — you can read it as bullish just as easily as bearish, and what you pick is usually just what you already want. This is why you need an objective process (writing down the scenario along with its invalidation conditions) instead of "feeling it."

(Noting this name down so that when "226" comes up again in other sessions, you know right away what it refers to.)

The trap right after finishing the theory: ADDICTED TO ENTERING TRADES

Once you finish learning the system, everyone is fired up wanting results right away → it turns into being addicted to entering trades. The teacher states an uncomfortable truth plainly: restraining yourself from NOT entering is far harder than clicking to enter. The one teaching enters very rarely, and whatever trade he enters is right; among new students, some place a few dozen trades a day.

Chain that to this note's 80/20 ratio and you get an inarguable calculation: the more trades you enter, the greater your odds of landing on a risk wave. A trader's goal is making money, not entering trades. Trade count is not a measure of diligence.

The condition for reducing your trade count is a condition of knowledge, not of willpower: you must be able to recognize whether a wave has all the required elements (a pattern + the higher timeframe allowing it + the lower timeframe confirming it), distinguish in-phase = the main wave / out-of-phase = a pullback wave, and distinguish the three situations of a single pullback · a contested range · a range with no force. If your knowledge isn't solid, an unsettled psychology is only to be expected — it isn't yet time to talk about training your psychology.

Two layers of ratio — don't mix them up

This vault has two different 80/20 figures that are easy to confuse:

• The time layer (see Identifying the range zone): 70–80% of the time the market is ranging, 20–30% it's trending.
• The wave layer (this note): ~80% of waves are risk waves, ~20% are profit waves.

They're related — risk waves are mostly born inside a range zone — but they are not the same thing. When writing or making an argument, be explicit about which layer you're using.

Putting it into practice

1. For every wave currently running, ask: which timeframe does this wave belong to? If you can't answer → skip it.
2. Pull up that timeframe and look back at the prior stretch: was there a pattern before this? If it was ranging before → it's a risk wave → skip it, even if it's running very strongly.
3. If there is a pattern: go on to check the sufficient conditions (the higher timeframe allows it, the lower timeframe confirms it) → Tactical mindset — the process to determine before entering a trade.
4. Accept it: out of 10 waves, throw away 8.
5. There are phases where the market's range is too small and waves aren't strong enough → hold back, reduce your frequency and your capital, instead of forcing yourself to find a trade.

What the teacher stresses / common traps

• Many people can analyze but can't control themselves — they jump into every wave they see, and by the end of the month they've had wins and losses but can't find any money.
• This is the line between the investor's position (fishing for a needle in a haystack to find a 70–80% win-probability opportunity) and the gambler's position (jumping into every wave, no different from flipping a coin).
• Buying power/selling power doesn't exist 24/7. Most of the time the market is "drifting"; to enter a trend you need preparation to already be there. Demanding that the market always has a winnable wave is demanding something that doesn't exist.
• If you can't tell "mackerel" from "carp," more studying won't help either — when it comes time to trade, you'll still bite on both.

The most extreme figure the teacher has ever given: "99% are sick waves"

In other sessions the teacher uses 80/20. In this session he pushes it much further and states clearly that this is a personal assertion:

"In the market it's 80%, 90%, and I'll even tell you flat out, 99% of it is sick waves — and if you can't let go of profit that isn't clear, then [one day] you'll be the one going down."

How to read this figure correctly. Don't replace 80/20 with 99/1 in your head — the 20/20/60 table is still the working framework. What the teacher is saying here is about severity, set in the context of a trendless market phase and altcoins that suddenly fly (the transcript mentions ARB, ID). In other words: among the waves that make your trigger finger itch the most, almost none of them are clean.

Careful: This is a verbal assertion, with no data attached. If writing about it publicly, present it as a deliberately exaggerated view used for emphasis, not as a quoted statistic.

"Fish on the chopping board" — the price of sitting there regretting a missed setup

The behavior being called out isn't entering the wrong trade, but sitting there clicking your tongue in regret over the wave that just ran. The teacher calls that state putting yourself on the chopping board: regret it long enough and next time you'll enter, and that entry won't be based on any evidence at all.

Along with this comes a figure about where those flying setups come from:

~99% of people who profit from setups like ARB do so because they HAD INSIDE INFORMATION; only ~1% got lucky.

This is the practical part — because it answers the question "why did they profit and I didn't?": most of the time they weren't better at reading the chart, they knew beforehand. Competing with them using technical analysis on a small-cap coin is competing on the wrong turf (ban co du an altcoin).

The counterweight the teacher offers is purposeful patience: "sometimes in life you only need one or two big waves" — when the market has real driving force, spread your capital, and a single uptrend wave is enough to change your position. As for insider information: the teacher states plainly that he has more than enough access to it but does not regard that as an investing mindset — profit that isn't earned legitimately doesn't last.

Related lessons

• Tactical mindset — the process to determine before entering a trade — the filtering process and mindset-setting before entering a trade
• Identifying the range zone — a ranging timeframe = a timeframe with no evidence; its waves are risk waves
• Range vs trend tactics — 60% of the time the market is ranging, where risk waves cluster
• Wave-progression theory — which timeframe is really deciding the wave
• Entry point — only a profit wave has a valid entry point