LTG Goldrock: Sydney

About

In trading we see patterns via charts and use all sorts of different tools to see more and more patterns. From these patterns we are trying to determine the probabilities of whether to enter or not enter a trade and what the probable trend will be. We know the market is simply the market and the market will do what it likes. Yet sometimes, like in life we want to try and predict the future the market and can get upset when our predictions don’t come true.

When I was listening to Chief delivering the training on scalping – taking lots of small trades in shorter timeframes, I was intrigued by the probability statistics he gave in relation to tossing a coin. That the odds of winning the coin toss is 50 times out of 100. Being the curious person I am when something piques my curiosity I decided to test out this probability theory. So I got a pad and pen, wrote down my “prediction” and then tossed the coin 100 times.

What I found was:

With each toss of the coin I somehow seemed to toss the coin slightly different to the time before, therefore I had no real idea how the coin was going to land.

When I became aware of tossing the coin differently I tried to introduce a system in my tossing the coin in the same manner to try and better the odds of winning.

When I counted up my wins out of 100 I did manage to slightly better the average – I won 57 times out of the 100.

I also tried to introduce a system of if I retained the same prediction whether this would assist me in increasing my average wins – sadly but surely, this definitely did not happen!

Predicting the future is simply not going to happen! I can be right sometimes but not always.

So what did I learn from this little practical exercise of playing the game of two up – the great Aussie game played only for gambling purposes on Anzac Day each year:

I received a really good sense of the market is simply the market. One simply cannot accurately predict each and every time how the market will trend at any given point in time or in the future.

The more I played the game, the better my overall results became, when I added up my wins and deducted my losses. However one simply cannot win each and every time. Therefore, we do need to understand and have in place risk management strategies to reduce our overall risk.

Keeping to the same prediction is not going to equal coming out ahead overall. In other words if I only trade long or short this will not equate to coming out ahead in my overall results.

By trying to develop a system to how I tossed the coin to give me an edge highlighted that by introducing a system to analysing potential trades will only give me an analysis of a probable outcome and even then this doesn’t mean I will win each and every time.

Whilst I played the two up game, I did not have any emotional investment in the game in relation to whether I won or lost. Therefore I was able to observe what I was doing far more clearly.

If I as a trader take my emotions out of the equation I will have more clarity of mind when analysing the market to determine opportunities to trade or to leave a trade be.