Trading is like tossing a coin. Suppose you have a coin in your hand. This coin has a front side and a back side. If we say that every time we toss it to the front side, we get +100, and if we toss it to the back side, we get -100.
If you flip a coin once, the probability of getting heads and tails is 1/2. If you flip it only once, there will only be one situation +100 or -100.
Trading is like tossing a coin. Suppose you have a coin in your hand. This coin has a front side and a back side. If we say that every time we toss it to the front side, we get +100, and if we toss it to the back side, we get -100.
If we toss a coin 1,000 times, the probability will be more inclined to 0.
The fluctuation range must be getting narrower and narrower, because the randomness is getting smaller and smaller.
Let's take another example. If we flip the front side this time, it is +200. If we flip the back side, it is still -100.
Then let me ask again, the probability of tossing once may be 200, or it may be negative 100, so if we toss 100 times, our profit is probably 200*50-100*50=5000
Have you noticed that my winning rate seems to be still 50%, why I didn’t make money the first time, but I made money the second time? This is the profit and loss ratio.
If you have a trading system, your trading system has a 2:1 profit-loss ratio, that is, every time I win, I get two shares of money.
There is no doubt that when the winning rate exceeds 50%, it is a positive return, right?
Then the winning rate is 33.3% when it is equal. It is difficult to find a trading system with a winning rate of 70%, but there are many trading systems with a winning rate of 45% to 50%.
Therefore, as long as you can grasp this trading framework, the subsequent technical analysis is just icing on the cake, it does not play a decisive role.
The most critical and core issue of the whole game is the capital profit and loss ratio. Therefore, if you understand the profit and loss ratio, you will understand what you are doing in the trading market, which is the core of trading.
The core elements of contract trading;
1: Strict fund management system (same risk fund for each transaction),
2:1:2 profit and loss ratio (for profit and loss other than 1:2, we will talk about moving stop profit and stop loss),
3: Only hold one currency in the same direction
Then the techniques and various indicators we have mastered are only to increase our chances of winning, so the more we learn, the more icing on the cake we will add. Later, I will continue to share how to add icing on the cake.
