Trading Results

There are 4 outcomes for a trader. You win big, win small, lose small or lose big. Out of the 4 outcomes, there is only one outcome that a trader would want to avoid - lose big. Overall, the probability of having a good outcome is 0.75. So what is the probability of losing big - 25%. Which is also 75% probability of not losing big. But still many falls into the 25%. Why?

Here's are some of my takes but it all lead to the same point. One lose big because one do not know when one is wrong. S/he has no idea where and when to cut. Another view is when one know that one is wrong but don't believed his or her luck, refused to admit one is wrong and decided to increase the limit on the spot.

Always remember, there's only one person that is always right . She is the Market and no one else. Hence one must always prepare to be wrong to be right i.e. Cutting when one know is wrong and found out one's cut is right. Even when one admit wrong and cut and the market show one is right not to cut, one is right in his or her previous prediction and one is also right to cut to maintain consistency. Hence a wrong also leads to a right and ultimately, one is still right. On the other hand, if one is wrong, doesn't admit and holds and market prove one wrong, there is absolute certainty that one is definitely wrong. However if market move back to prove one is right, one is sure to wrong in future as one becomes not consistence. So it is still better to cut immediately when wrong as planned.


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