What is the Trading Paradox?

Let me ask you a question: do you believe I could predict with certainty the price the S&P will close at today?

No?

Well then, let me ask you this: do you believe that I can tell you with certainty whether the S&P will close up or down today?

No?

Then how is it that I can be consistently profitable in my trading?

If you can answer this question, you’ll have avoided one of the major hurdles to consistent profitability.  Ready for the answer? Here it is:

on a trade by trade basis, the market movement is uncertain and random. But, over a large sample size, market movement is relatively certain and predictable. 

It’s as simple as that.  Anyone that tells you he’ll teach you how to have a 100% trading record is scamming you or delusional. Losses are part of the game. The ‘secret’ is to ensure that

your average dollar loss x loss rate is less than 

your average dollar x win rate.

The major hurdle to success? The refusal to take losses. We do this even though we know better. Why? Because of the fear that after our exit, the trade will turn out to be a humongously profitable – and we won’t be aboard!

By the way, if you want to know how to overcome this hurdle – read the current the Wednesday series.

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