Why Your Next Trade Means Nothing
🧠 The Notebook Process #2 — Understanding the True Nature of Trading.
Some laws govern everything we do, and trading is no exception, even if it often feels like pure chaos.
Every tick looks random. Every trade feels unique. Yet beneath that noise, a hidden law quietly shapes your results. It’s one of the cornerstones of statistics, and it rules every trading account on Earth: The Central Limit Theorem.
Don’t worry, no math coming your way: just an intuitive truth you can plug directly into your trading mindset.
📖 The Nature of Trading.
Your true profitability, your average win or loss, only begins to emerge and, more importantly, stabilize after a large number of trades.
That’s it. That’s the law.
A single trade? Meaningless. Ten trades? Still noise.
Hundreds of trades? That’s where the truth starts to show. What you see after enough repetitions isn’t randomness anymore: it’s your edge revealing itself.
That’s the Law of Large Numbers and the Central Limit Theorem in motion: pure science.
☑️ What This Means for Traders.
Your system’s real strength, its expectancy, only appears through repetition.
A handful of trades? Still luck. Pure variance, random ups and downs that mean nothing.
A few hundred? Now you’re seeing skill: the signal rising above the noise. In plain English:
“A trading journey can only be evaluated after a large number of trades. That’s why your process matters more than your last result, no matter how good or bad it looked.”
And that’s exactly what The Notebook Process #1 was about: 👉 Evaluate in blocks, not single trades.
💸 Let’s Put the Law to Work:
1️⃣ Take your trading record and compute: Average win, Average loss, and Win rate.
2️⃣ Calculate your expectancy using this simple formula:
(Avg Win × Win Rate) – (Avg Loss × (1 – Win Rate))
3️⃣ That number tells you how much you make (or lose) per trade on average, and more importantly, what you can expect to make in the future.
If it’s positive, you’re trading with an edge. Keep going: reproducibility is what makes it stable.
If it’s negative, stop immediately. The bleeding won’t stop until the math changes.
That’s it. Pure math applied to trading: and believe me, you don’t want to fight this law.
🌍 The Gravity of Trading.
The difference between a trader who understands and one who only tries isn’t talent, it’s focus.
Focus on expectancy, not the win rate, not the reward to risk ratio.
It might seem basic, but so is gravity, and like gravity, it governs you whether you believe in it or not.
