Trading is all about PROBABILITIES! The secrete of successful trading 🤑

As I sit back and reflect on my journey as a trader, where I was and where I am today, I can definitely tell that the things I didn’t get right at first. For example, one of the basic lessons that I’ve learned and come to accept is that certainty in the market is just an illusion.

You may analyze the markets in any vibrant manner. But all the available tools tell you about something which is likely to happen. But for a fact, it doesn't mean a sure thing.

Here’s an analogy that is often used in trading: If I flip a coin that’s slightly more weight on the tails side, I know how the outcome will shape up in the long run. (overall, it’ll land more on the tails side). But in the short-term, there will be a lot of noise – the coin will land on both heads and tails, often in series of flips. No matter how extraordinary your market edge is or the working strategy you have, if you place all your hopes and dreams on any individual trade and start risking the farm, at some point, you are going to be disappointed.

Now, not knowing how things will turn out in the short term has led many traders (even experienced ones) to fear the term ‘prediction,’ or ‘forecasting.’ My take on it is the moment you place a trade with a directional bias, you are, in effect, predicting/forecasting/anticipating. Our mind is an interesting “tool”. Our thoughts are a repetition of past events/experiences/reactions that flowed into our mind in the present. It’s constantly attempting to use those experiences in some way –consciously or subconsciously to predict the future.

You don’t put your hand on a hot stove because your mind predicts that if you do it, you will get hurt (based on past experience.)
When driving, you put your seatbelt on in anticipation of some future unfavourable event.

As you can see, we make predictions all the time. Trading is not a parted. We will try to do the same thing in trading as well. But it’s not predicting/forecasting that’s an issue. It’s our expectations that are not aligned with some basic probabilistic facts that lead the majority of the people to disaster.

Let me give you an example of how probability works, "The sun will rise tomorrow". This is not an entire fact. But based on what we know about science and the laws that govern this universe, this is a very high probability. And so, having a high expectation that the sun will rise tomorrow wouldn’t be out of line. Even we are getting up tomorrow morning still a probability! So, Everything about our life is the mere probability at the macro level; at the micro-level, survival itself is a game of probability. And what bothers the typical trader is a poor understanding of his probabilities in trading.

We usually have high levels of authority in many areas of our life,

You need something to eat? Just head to the grocery store.
Inconvenient weather conditions? Cover yourself. Take an umbrella.
Don’t like a particular tv program? Change the channel.

It's pretty straightforward, isn't it?

The problem starts when we expect the same in trading. We’re so used to controlling things in our daily lives with high degrees of success because the probability of successfully doing so is high. When we come into trading, we bring in that same kind of mindless expectation.

We place a trade, and then we expect a particular outcome, in fact, on every trade by trade basis. And we feel like we have to control the trade, tweak it, and constantly check it to make a consistent outcome. But when it doesn’t happen, we feel sad; we have a hard time accepting it.

Prediction exists on a sequence ranging from low probability to high probability. And the thing with trading is that your probability of success in the short run will never be as high as it can appear in other areas of life. It’s just a fact. There is always a noise when you look at trading for the short term. Fate plays a big role in this game. And it’s just something you have to learn to accept.

"ACCEPTANCE OF THE REALITY MAKES A HELL LOT OF DIFFERENCE IN TRADING"

Acceptance is the act of ‘being at peace with.’ It’s about embracing. Acceptance literally means ‘taking what is offered’. It doesn’t mean just bearing the outcome. No, it means fully opening yourself to your present reality, acknowledging how it is, right here and now, and letting go of any internal conflict.

But what if you want an outstanding trading performance and not just ‘accept it as it is? Well, that’s the mystery: The more you accept the outcomes of your trades without resisting; the more you keep placing other trades irrespective of how your past trades made you feel, well, the more you’re letting the probabilities work their magic without interruption the more your performance of trading improves.

So if you can learn to understand, accept, and appreciate your probabilities present in trading, your actions will be far more effective since all the time and energy you spend on fighting with thoughts and feelings will be spent taking real actions.

Here I want to end my blog by quoting, " Impeccable Execution is the real HOLY GRAIL of trading". I hope this blog will help you. If you like the content, hit the like button and share it with your trading friends.

If you have any questions, kindly post them in the comment :)

Happy Trading 😎

Wishing you most and more,

Nataraj Malavade

Samantha

May

Trading is all about PROBABILITIES! The secrete of successful trading 🤑

Nataraj Malavade

Recent Posts