Quote from: Goomboo on May 26, 2013, 08:16:19 PM

In this thread, weve covered a variety of different topics. Each of these topics combines into a simple, central truth of trading. The job of a trader is very straightforward: make the value of your account increase through time. All of the activities which a trader participates in - strategies, techniques, risk management, psychological discipline are all about making the line go from bottom left to top right.

This is the sole objective of the trader: profit. A good trader is not concerned about being right in his market call. A good trader does not care about selling the top or buying the bottom. The great trader gets rid of his ego and focuses on what works: trading with an edge.

So what is an edge? An edge is quite simple really: trading with a positive expectancy. Rather than boring you with math and statistics, Ill present two hypothetical traders. Which trader do you think has an edge? Which trader would you let manage your hard-earned money?

Trader A
-   Wins 70% of his trades
-   The average winning trade earns $100
-   The average losing trade results in a $500 loss

Trader B
-   Wins 30% of his trades
-   The average winning trade earns $1,000
-   The average losing trade results in a $100 loss

At first glance, you may think Trader A rocks hes right 70% of the time! Wrong. The truly successful trader is one who is able to structure his trading in such a way that even if he loses the majority of the time, his winners are of such a size that they more than compensate for strings of losses. The chart below powerfully demonstrates this concept. This chart is just a simple random simulation of the two traders above. It shows the amount of money each trader has in his account after 100 trades.

So I ask you again: which trader would you trust with your money? Cant you see that trading really isnt about being right? Its about making money. Check your ego at the door and stop trying to be right in calling market direction. After all, Trader A is right about market direction 70% of the time. He's the guy who sold at the top and bought at the bottom - the market guru! But at the end of the day, he's dwindling away his money because he doesn't understand the simple truths of trading.

Would you rather look smart or make money?

Oh and by the way, Trader B lost 14 trades in a row at one point. Do you have the discipline to continue trading your system even in the face of 14 consecutive losing trades? Most don't - but then again, the majority of people lose money in the markets.

Solution: don't trade.

Or if you trade trade very infrequently and more on long term cycles.

edit: You may want to include dates on your X-axis.