January 2012
Intermediate to advanced
624 pages
17h 49m
English
Chapter 25
Mathematics of Trading: Should I Take This Trade? Will I Make Money If I Take This Trade?
I havea friend who has traded for over 30 years, and I think that he makes 10 or more points in the Eminis pretty much every day. He once told me that he believed that the average beginner should be able to make at least six points a day. I told him that I disagreed—that most beginners would be happy to consistently make two points a day. I left the conversation realizing that there are traders who have been wildly successful for so long that they have completely forgotten what it was like to be in the losing camp. However, the conversation also made me realize that, with enough experience, traders’ good habits can become so much a part of who they are that trading becomes essentially effortless. But in every case, mathematics still has to be the basis of what they are doing. In fact, trading is entirely about math, and all successful traders understand probabilities and the trader's equation extremely well. The math changes with every tick, which is a barrier to those who don't understand what is going on and a great advantage to those who do.
Beginning traders are constantly looking for the perfect trade, one with a clear setup, high probability of success, low risk, and a large reward. At the end of the day, they wonder why they couldn't find one. Surely those trades exist, because how else are the big traders getting rich? What they don't realize is that making money is very ...
