A Systematic Process driven strategy and Probability Trading go hand in hand.

One can’t live without the other.

A random inconsistent trading approach is not conducive to taking advantage of probabilities.

Truism: Most upside surprises will occur with stocks in uptrends. Most downside surprises will occur with stocks in downtrends. That’s a probability.

Probabilities: The statistical likelihood of one thing happening over another and that, in our investment world, is driven by a market edge, of which there are many, like the above probability or a simple trend that prices regularly follow.

Just as I talked about the Profit Gap in my YouTube video dated 9/2/23, today I want to talk briefly about the Expectation Gap that can drive you mad – if your expectations are too high, and unfortunately that’s a natural human failing in the markets- to dream. We need to reset our expectations.

Back to market reality. What should we expect? Some wins, some losses. Some big wins but never big losses. Risk management takes care of that. It’s so simple yet we find it so hard to execute. You need to find a way.

This assumption is based on our 2 simple setups (New High, Trend Reversal) that are managed with defined responses to price action. That way we keep our trade management consistent allowing the odds to play out to their optimum levels.

10 traders/investors see a market opportunity (and often we are all looking at the same one) but there will 10 different outcomes. Biases, expectations, discipline, fear, and greed are all causes of such a range of divergent outcomes trying to capitalise on one market edge. These are all things we need to be aware of and manage them all in the name of improving those odds of success. The success barometer of course is the profit we make and satisfaction levels we acquire during the process.

Odds are odds, not guarantees and this where our expectations are important. They need to be managed carefully to negate the influence of swinging emotions. We not only need to keep our poise to trade well but we also need to look after the satisfaction levels of our heart, mind, and soul.

If our odds are 50/50, up or down, and we limit the ‘down’ and run the ‘up’,

we will make money.

Back to profits losses and expectations. Losses and their control are just as important as profits so we need to wind back our expectations to be in line with what we can realistically achieve not just dream of. If you want to really dream buy yourself a Lotto ticket.

There are other simple odds-based portfolio management techniques many of which we take for granted just how important they are.  Our objective is to achieve over time, not just today. Such things as:

Sector Weightings – Keep your balance.

No favourites – Don’t overlaying your opinion.

Equal Portfolio Weighting – Endears consistency.

Common Sense: Tells us a stock going up and paying a dividend is good. There are traders with many different strategies and plays but we should not forget the natural advantage of quality stocks that go up most of the time and pay a dividend along the way and then we get into imputation.

Well, what a gift and that great advantage should not be thrown in with the traders trying to make a couple of pips on a spread trade – or other. We are normal people with super funds and trading portfolios and all too often we focus on the wrong things like a market that (could) go down. Yes, they do but the market spends historically 81% of the time rising and 19% going lower. Common Sense says……?  It’s like having the house advantage. The game is stacked in your favour if you play it right. So, in fact a market going down should be viewed as an opportunity to build.

Simplicity: Each time you add a layer of complexity you reduce the odds and dilute the power of your core objective playing out. You would think by being smarter and adding more rules or ‘adjustments’, you increase those odds. Not necessarily so. Why do so many successful market traders say simplicity is your best friend. Stick to your core plan, have conviction, don’t listen to arguments outside that plan, and work the probabilities of your edge – over and over.

Understanding how to manage a trading process and know what the key components to success are, is vital in your journey to unleash the trader in you. Our Trading Centre forms the core of what Stockradar does with its entries, exits, alerts, reversals, breakouts, stops and other trade management necessities. We do this weekly for reasons of perspective and stress. From there via our newsletter, blogs and YouTube videos, we discuss the process driven approach of taking advantage of probabilities educating members on the many topics mentioned above because to ignore any of them is to invite a perilous start to your journey.

Systematic, process driven trading, and probabilities, go hand in hand. A random inconsistent trading approach does not know how to take advantage of probabilities.