PREDICTION TRAP

28 Dec 2016

People love making Predictions of what a market/ stock will do in the Future.

There is a strong psychological bias to be RIGHT about what we do with our investments.

Most people have overwhelming needs to CONTROL the market.

However, an extremely successful prediction can even result in LOSING all of capital.

 

Example: a system has 90% Winning trades where the average winning trade is $275 and only 10% Losing trades where the average losing trade is $2,700

 

Expectancy = (0.9*275) - (0.1*2,700) = -22.5

 

This is a system through which you get to be RIGHT 90% of the time and still lose all money.

 

(Expectancy tells you how much you can expect to make on average per dollar risked.)

 

 

 

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© 2016 by aTrader