Lessons from an Experienced Trader #3

Lesson 7 Trade Outcome is Random

The outcome of any given trade is random, no matter how strong your edge is. It is impossible to predict whether a trade will result in a loss, decent profit, or a windfall profit. Contrary to what most Price Action traders and price analysts believe, you cannot and will never be able to predict the market. Most amateur traders fail to recognize this fact, or deny this reality altogether. They believe eventually, they will be able to avoid losing trades and pick winners. They do not understand the outcome of any given trade is random, and therefore impossible to know before hand.
Consider weather prediction as an example. Meteorologists have highly sophisticated weather models and algorithms to predict weather behavior, just like traders and institutions in the market. Yet the weathermen cannot accurately predict what will occur. They can say "There is a 60% chance of rain today if you live in X." But they cannot say exactly when or where rain will fall. It is the same in the market. You may have a good idea of what may occur, and even be right! However, there is still a reasonable chance (usually around 40%) that you are wrong, and the exact opposite will occur.
The market is always right. It does not matter what you think or believe should or will happen. All that matters is what is happening. Just because a trade looks good or an edge is strong, does not mean it will result in a profit. There is still an opposing probability that it will fail.

The point is that you will never know beyond a reasonable doubt what the market will do next. You may have a hunch, or a strong edge, but that will only get you so far. Therefore the only thing to do is to always take your edge, because you never know if this will be the windfall profit you are looking for, a small profit, or a loss. And quite frankly, it does not matter!

Lesson 8 Market Outcome Does Not Matter

The outcome of any single trade does not matter. It is very common for traders to become attached to the outcome of this individual trade. This is what leads to emotions, anger and frustration with trading and the market. We get stuck in the mindset that we have to win X amount of profit like 2X risk on this trade, or have to make money every day to be a profitable trader. This is not the case at all. In fact you only have to win one 1 or 2 really good trades out of 10 to maintain a consistent performance.

Any single trade is irrelevant to a trading system or strategy. It is the cumulative result over a series of trades that results in a profit. This is why it is so important to know and only trade your edge, otherwise you introduce randomness into your performance, and are unable to produce consistency.

*If you find this analysis helpful please like! Feel free to comment or ask questions.


Learn to Trade Futures, Stocks, Forex, or Cryptocurrency

Develop your Traders Mentality

Price Action Trading + Trading Psychology in one place.
*thumbs up* But I do not see a lesson six..
@StackerUp, sorry i forgot to number it. it is titled
Overcoming Emotions and Zen Trading
Home Stock Screener Forex Screener Crypto Screener Economic Calendar How It Works Chart Features Pricing House Rules Moderators Website & Broker Solutions Widgets Charting Solutions Get Help Feature Request Blog & News FAQ Wiki Twitter
Profile Profile Settings Account and Billing Get Help Ideas Published Followers Following Private Messages Chat Sign Out