ay $6 to win $8. I will be a consistent winner if I play long enough.

In mathematical terms, your expected win each time you play is

(4/6) X $2 = $1.33 meaning $0.33 profit (you pay $1 to play)

Another version of this game could be that you win $3 if you roll a 4, a 5, or a 6, and nothing if you ro

As a trader, you have to forget about finding a sure thing. You must accept the fact that the stock market can do anything at anytime. If you are not convinced, consider that there are millions of traders trading for institutions, funds, investors, swing traders, scalpers, etc… all acting together in different time frames and using different types of analysis.

Fact: Trading is not about guessing the future because it cannot be done.

If you accept this fact, then it is much easier to take losses without destroying your self-esteem. You take a trade, you accept that you don't know what will happen next. You have no expectations that this trade will turn into a winner. Your only expectation is that something will happen.

So how do you make money not knowing what will happen next? You treat trading as a probability game. Here is an example of a probability game:

Let's say I roll a dice:

- I pay $1 each time I play

- If I roll a 3, a 4, a 5, or a 6 then I win $2. If I roll a 1 or a 2 then I don't win anything.

Clearly, every time I roll the dice I have no idea what the outcome will be. But I know that for every roll the odds are in my favor. In the long run, I will win 4 times out of 6, which means that I will pay $6 to win $8. I will be a consistent winner if I play long enough.

In mathematical terms, your expected win each time you play is

(4/6) X $2 = $1.33 meaning $0.33 profit (you pay $1 to play)

Another version of this game could be that you win $3 if you roll a 4, a 5, or a 6, and nothing if you rol

frames and using different types of analysis.

Fact: Trading is not about guessing the future because it cannot be done.

If you accept this fact, then it is much easier to take losses without destroying your self-esteem. You take a trade, you accept that you don't know what will happen next. You have no expectations that this trade will turn into a winner. Your only expectation is that something will happen.

So how do you make money not knowing what will happen next? You treat trading as a probability game. Here is an example of a probability game:

Let's say I roll a dice:

- I pay $1 each time I play

- If I roll a 3, a 4, a 5, or a 6 then I win $2. If I roll a 1 or a 2 then I don't win anything.

Clearly, every time I roll the dice I have no idea what the outcome will be. But I know that for every roll the odds are in my favor. In the long run, I will win 4 times out of 6, which means that I will pay $6 to win $8. I will be a consistent winner if I play long enough.

In mathematical terms, your expected win each time you play is

(4/6) X $2 = $1.33 meaning $0.33 profit (you pay $1 to play)

Another version of this game could be that you win $3 if you roll a 4, a 5, or a 6, and nothing if you ro

xpectations that this trade will turn into a winner. Your only expectation is that something will happen.

So how do you make money not knowing what will happen next? You treat trading as a probability game. Here is an example of a probability game:

Let's say I roll a dice:

- I pay $1 each time I play

- If I roll a 3, a 4, a 5, or a 6 then I win $2. If I roll a 1 or a 2 then I don't win anything.

Clearly, every time I roll the dice I have no idea what the outcome will be. But I know that for every roll the odds are in my favor. In the long run, I will win 4 times out of 6, which means that I will pay $6 to win $8. I will be a consistent winner if I play long enough.

In mathematical terms, your expected win each time you play is

(4/6) X $2 = $1.33 meaning $0.33 profit (you pay $1 to play)

Another version of this game could be that you win $3 if you roll a 4, a 5, or a 6, and nothing if you ro

ay

- If I roll a 3, a 4, a 5, or a 6 then I win $2. If I roll a 1 or a 2 then I don't win anything.

Clearly, every time I roll the dice I have no idea what the outcome will be. But I know that for every roll the odds are in my favor. In the long run, I will win 4 times out of 6, which means that I will pay $6 to win $8. I will be a consistent winner if I play long enough.

In mathematical terms, your expected win each time you play is

(4/6) X $2 = $1.33 meaning $0.33 profit (you pay $1 to play)

Another version of this game could be that you win $3 if you roll a 4, a 5, or a 6, and nothing if you ro

ay $6 to win $8. I will be a consistent winner if I play long enough.

In mathematical terms, your expected win each time you play is

(4/6) X $2 = $1.33 meaning $0.33 profit (you pay $1 to play)

Another version of this game could be that you win $3 if you roll a 4, a 5, or a 6, and nothing if you roll a 1, a 2, or a 3. In this case the expectation each time you play would be

(3/6) X $3 = $1.50 meaning $0.50 profit in the long run

So how do we translate this into trading?

Each time you roll the dice, you don't know the outcome, the same as for each individual trade. But each time you roll the dice, you know the odds are in your favor to make money, and you will make money if you play long enough.

So for each trade you enter, you must know that the odds are in your favor to make money. As you can see in the second example, it does not mean that you have to win more often that you lose. It also depends on how much you win when you win and how much you lose when you lose.

How do you put the odds in your favor?

You have to develop a trading edge using technical analysis, fundamental analysis, market internals, etc.. You have to have a number of variables that must be present before you enter a trade and always use the same set of variables. Your edge is your strategy to enter and exit trades and should be well defined in your trading plan.

All that can be summarized as follows:

- For each trade you take, you don't know the outcome, you accept that anything can happen, and therefore you have no expecta