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- Thinking in probabilities
Exactly what does it mean to think in probabilities?
And why is it so essential to one’s consistent success as a trader?
How can a trader produce consistent results from an event that has an uncertain outcome?
The answer lies within the gambling industry.
Corporations spend hundreds of millions on elaborate hotels and casinos.
Their primary function?
Day after day, year after year, casinos make consistent profits on an event that has a random outcome.
Casino owners produce consistent results because:
They keep the odds in their favor
Achieve a large enough same size of events
To illustrate, let’s look at the game of blackjack.
In blackjack, the casinos have a roughly 4.5% edge over the player.
The casino will generate net profits of four and a half cents on every dollar wagered on the game.
That 4.5% might not sound like a lot, but let’s put it into perspective.
Suppose $100 million dollars is bet at all of a casino’s blackjack tables over the course of a year.
The casino will net $4.5 million.
Each hand is a random event, independent of every other hand.
But on a collective basis, the opposite is true.
If a large enough number of hands gets played, the outcome is no longer random.
As a trader, the takeaways are:
One’s trading strategy should keep the odds in your favor
One must achieve a large enough sample size of trades
I used to be a boom-and-bust trader.
I would make large sums of money over long periods of time, but then give it back.
Sound familiar?
I wasn’t focused on keeping the odds in my favor.
So I challenged myself to fix this and started the $2,000 Small Account Journey.
My assumption was to keep the odds in my favor and achieve a large sample size.
I figured as long as I did that, it didn’t matter if I started with a small balance, in theory, it should get bigger.
Since November 13, when I started the current $2,000 balance, I’ve kept the odds in my favor with the strategy SAJ teaches.
And I’ve achieved a large enough sample size of trades coming up on 100.
The result has exceeded my expectations.
Results not typical. Trading is hard. Nothing is guaranteed.
On a micro level I never worry about any one trade.
Because on a macro level I know the strategy I’m deploying keeps the odds on my side.
When a loss does come, I’m unemotional because I understand its place in the process.
What the casinos have taught me has changed the way I see trading forever.
When you subscribe to the $2,000 Small Account Journey you are not only learning how to grow a small balance.
You are learning what it means to own the casino.
Find out more → https://join.ragingbull.com/small-account-journey
Eat, sleep & trade!
Jason Bond
P.S. with bitcoin at all time highs, it is too late for COIN, MSTR, RIOT, etc… but there is a new miner that just came to market recently that most traders haven’t been paying attention to. This is another explosive penny stock idea and we’ll have all the details first thing Monday morning. When it comes to penny stocks getting in and out fast, targeting the meat of the move, is the name of the game! Look for all the details Monday morning.
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