Start thinking Probabilistically!
In this blog, I am going to show you how to look at the larger picture of trading and hopefully give you a paradigm shift in your thinking!
So there is a random distribution between wins and losses in the short term but in larger sample sizes the probabilities begin to work. In the below image imagine this is a series of trades.
Now imagine if every ✔ was a +3R win And each ❌ was a -1R loss Total = +44% Return
But would you have stuck with the strategy after only 1 win in 9 trades or losing 10 in a row? Most wouldn't. Most would have given up and switched strategies by then. And this my friends are the exact reason why most fail!
95% Just Give Up Or Switch To The Next Strategy!
No discipline,
No trust,
No idea that every trade is random in the short term.
It's only when we put these random samples all together Do we gain a positive expectancy!
You Have To Marry Your Strategy!
This is why the discipline to stick to your strategy .
Through the good and the bad times are so important
Just like a good marriage, you have to work at it!
Is This The Missing Piece Of The Puzzle?
Imagine if you just stick with it till you have a much larger sample size?
Or if you stay with your system after 6 in a row?
Maybe your trading would look a lot different.
Stay Focused!
Stop thinking outcome.
Start thinking process!
Once you do your whole trading will change!
Conclusion
Hopefully, this visual representation can make you see trading in a different light. You need to start trading the numbers and not your emotions... Learn to think probabilistically. And realise you are a lot closer than you think.
I hope you enjoyed this post. Let me know if it helped you!
To Your Success,
Alan
The Divergent Trader
Short but very informative