is trading a game of probability?
I agree trading is about probability because no matter how good a strategy is, it can never work all the time.
For me, I try to execute the same strategy over and over again then take note of the number of winners and losers. With that information I can tell the probability that the next time i take the same trade it will go in my favor. You can also back-test the strategy with historical data to see its win-rate.
Not just probabilities, trading is also a game of averages and that is why pivot points are effective.
Trading is a game of probabilities not certainties.
Every trade you take has an uncertain outcome. You don’t know how price will move, how fast it will move, whether news will affect it, whether your analysis will play out.
What makes trading a probability game?
Trading is influenced by the following;
1. Human behavior
2. Economic news
3. Large institutions
4. Market psychology.
Most of these factors are unpredictable, hence why trading is a game of probabilities.
When you study behavioural finance, you will learn that investors often take decisions based on emotions like fear even when the numbers are right in front of them. Because of this, even when the technicals show you that price is supposed to move in a certain direction, you can suddenly see a reversal and move in the opposite direction. So, nothing is guaranteed in trading, making it a game of chance.
