The game of probabilities (%)
In this article we will explain some fundamental truths about trading that any beginner should know in order to start being successful:
1. You don't need to know what is going to happen next in order to make money.
Because any given set of independent variables that define an edge has a random distribution of wins and losses. In other words, based on your performance, you should know that from 100 trades that you take you should have 65 wins and 35 losses for example. The unknown part is the sequence of that distribution. You can have 10 losses in a row or 20 wins in a row. This fundamental truth makes trading a game of probabilities. When you know and believe that, a win or a loss doesn’t have the same meaning as before.
2. An edge is nothing more than an indication of a higher probability of one thing happening over another.
To achieve consistency, you must agree that trading isn't about wishing, guessing, or collecting information to decide if the next trade will succeed. The only proof you need is that the variables you're using to describe an edge (your system) are present at any given time. You're adding random variables to your trading regime if you are using "other" facts beyond the parameters of your edge to determine whether or not to take the trade. If you are not sure about your edge you won’t feel confident about it and if you don’t feel confident you will experience fear.
3. There is a random distribution between wins and losses for any set of parameters that define your edge.
If you believe that trading is about being right, when you experience a loss, you will blame yourself for that loss when in reality if you respect your system’s parameters you should not take the blame for it. If you blame yourself then on the next opportunity you will be afraid of the outcome. As a result, you'll begin collecting information in support of or against the trade. If your fear of missing out (FOMO) outweighs your fear of losing, you will collect facts for the trade. If your fear of losing (FOL) outweighs your fear of missing out, you will collect knowledge against the trade. You won't be in the best frame of mind to achieve consistent outcomes in this event.
4. Every trade is special and unique.
Even if our minds are perceiving some trades as being the same as others that we have in our memory, every moment in the market is unique. If each moment is unique, there's no way to predict for sure what will happen next based on your logical experience.
Trade with care.
If you like our content, please feel free to support our page with a like, comment & subscribe for future educational ideas and trading setups.
1. You don't need to know what is going to happen next in order to make money.
Because any given set of independent variables that define an edge has a random distribution of wins and losses. In other words, based on your performance, you should know that from 100 trades that you take you should have 65 wins and 35 losses for example. The unknown part is the sequence of that distribution. You can have 10 losses in a row or 20 wins in a row. This fundamental truth makes trading a game of probabilities. When you know and believe that, a win or a loss doesn’t have the same meaning as before.
2. An edge is nothing more than an indication of a higher probability of one thing happening over another.
To achieve consistency, you must agree that trading isn't about wishing, guessing, or collecting information to decide if the next trade will succeed. The only proof you need is that the variables you're using to describe an edge (your system) are present at any given time. You're adding random variables to your trading regime if you are using "other" facts beyond the parameters of your edge to determine whether or not to take the trade. If you are not sure about your edge you won’t feel confident about it and if you don’t feel confident you will experience fear.
3. There is a random distribution between wins and losses for any set of parameters that define your edge.
If you believe that trading is about being right, when you experience a loss, you will blame yourself for that loss when in reality if you respect your system’s parameters you should not take the blame for it. If you blame yourself then on the next opportunity you will be afraid of the outcome. As a result, you'll begin collecting information in support of or against the trade. If your fear of missing out (FOMO) outweighs your fear of losing, you will collect facts for the trade. If your fear of losing (FOL) outweighs your fear of missing out, you will collect knowledge against the trade. You won't be in the best frame of mind to achieve consistent outcomes in this event.
4. Every trade is special and unique.
Even if our minds are perceiving some trades as being the same as others that we have in our memory, every moment in the market is unique. If each moment is unique, there's no way to predict for sure what will happen next based on your logical experience.
Trade with care.
If you like our content, please feel free to support our page with a like, comment & subscribe for future educational ideas and trading setups.
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