Trading Is Simply A Numbers Game

Take our free mini course

Free trading platform download

There is a very big misconception about trading and that it is complicated and sophisticated and you are better off leaving it to the so-called experts to invest for you. I totally disagree with this theory and I certainly disagree that giving your money to others is the best course of action. Giving your money to others to invest on your behalf generally ends up with you living in hope, you getting an average return at best and the person investing your money and thousands of others getting rich. Learn to understand the simple numbers game of trading and you can turn the tables and enjoy some genuine meaningful results.

Life is full of certainty and we can each have a healthy degree of influence on virtually every situation in our life. In the financial markets influence does not exist on individual trades and therefore certainty on individual traders does not exist either. What is required is an edge, that when repeated over a series of trades provides the probability of making a meaningful return on investment.

It is not helpful to think short term when trading because it is not possible to influence or have certainty on one position. Where certainty comes from is executing positions over a series of trades with solid risk management. Let me give you an example.

When I am coaching my investors at Trading Mastery, I am always advising them to analyse their overall performance over a quarter and not be concerned with one trade or even half a dozen. What matters is how you execute risk and reward over 20 or 30 trades.

Assume you take 30 trades over a 3-month period. This is an average of 10 trades per month and these trades could be spread across various markets. When your edge appears in the market you execute each trade and set the profit target and stop loss. Following are two different scenarios. Scenario #1 is winning 70% of the trades you enter and Scenario #2 is winning just 50% of the trades you enter. But as you will probably pick up on the risk and reward are different for each scenario.

Scenario #1
30 trades
21 winners
9 losers
Each winning trade = $1000 on average
Each losing trade = $1000 on average
Final result after 30 trades = $12,000
Scenario #2
30 trades
15 winners
15 losers
Each winning trade = $2000 on average
Each losing trade = $1000 on average
Final result after 30 trades = $15,000
In scenario #2 your success rate was only 50%. You made money only 50% of the time you traded but the difference was that each time you had a winning trade it was twice the size of each losing position. Your profit was $15,000 vs Scenario #1 which was only $12,000 where you needed a 70% success rate.

Successful trading is not about how many times you win or lose, successful trading is about how much you make when you win vs how little you risk when you lose.
It is a myth populated by losing traders that to make great money in financial markets you need to be right better than 70% of the time. This is nonsense, you can make outstanding returns on investment being right only 40% of the time provided you structure your trades using your edge to win greater than you are risking.
At Trading Mastery, you will never enter a position to win the same amount you are risking. Every trade, no matter what market you are trading you will always structure your trades to win bigger than you are risking and the edges you will learn will allow for this every time.
There is no secret formula for higher returns on investment and too many traders spend too much time trying to come up with sophisticated technical systems that do not improve the odds of them making money.
Here at Trading Mastery we teach our students simple edges they can replicate over a series of trades with a risk reward ratio that sees them win bigger than they lose. You will learn to replicate a diversified simple process over a series of trades without deviating on the risk and reward. This will set you apart and potentially see you make higher returns on investment.

Numbers