TRADING MINDSET, PSYCOLOGY, & THINKING IN TERM OF PROBABILITES

Consistent Winners Think without Emotions

Being Able To Adopt the Right Mental State

LESSON NO: 1

Learn To Embrace Risk (Accept the Risk)

“Next Trade Is a Random Event”

A Sequence of Random Events Can Produce a Sequence of Losing Trades

Every Trade Has Uncertain Outcome  Accept This Risk

No One Knows How Market Will Turn out It Can Be a Win or a Loss

Lesson No: 2

Think In Term of Probabilities

W W
L LW  13 WINS > 7 LOSSES (EDGE)
W L W W L
W W W L W
W L L
W W

SET OF TRADES

FIVE FUNDAMENT TRUTHS

1ST ANYTHING CAN HAPPEN

It Is Impossible To Know What Will Be the Next Outcome of These Different Beliefs

2ND YOU DON’T NEED TO KNOW WHAT IS GOING TO HAPPEN NEXT IN ORDER TO MAKE MONEY

Don’t Predict market, just react to it.

3rd THERE IS A RANDOM DISTRIBUTION BETWEEN WINS AND LOSSES FOR ANY GIVEN SET OF VARIABLES
THAT DEFINE AN EDGE

“Outcome of a set of trades is always random”

4th AN EDGE IS NOTHING MORE THAN AN INDICATION OF A HIGHER PROBABILITY OF ONE THING
HAPPENING OVER ANOTHER

20 TRADES 12 WINS / 8 LOSSES

You have an edge (it doesn’t mean you will win every time)

5th EVERY MOMENT IN THE MARKET IN UNIQUE

Market always produce random outcome

Lesson no. 3

DON’T FALL INTO THE GAMBER’S FALLACY

Anything Can Come, 50% Chance of Both

Statistically a minimum of 30 Samples are required to determine validity

Every singular event is completely independent of one another

Lesson No. 4

HAVE A CREFREE STATE OF MIND

Market is uncertain and it can be a win or lose but if I will be consistent and follow my strategy with
discipline, I will win over a set of trades

[SEVEN PRINCIPLES OF CONSISTENCY]

1ST Objectively identify your edge (Back tested wining system over a set of trades)

2nd you must predefined you risk

3rd you must completely accept the risk and not be surprised if the trade looses

4th you act upon your edge or strategy without reservation or hesitation

5th you pay yourself only if the market makes money available to you

6th you continually monitor your susceptibility for making errors

7th you understand the absolute necessity of the principle of consistent success and therefore you never
violate them

Lesson no. 5

OVERCOME ALL YOUR TRADING FEARS

95% -- TRADING ERRORS

FOUR PRIMARY TRADING FEARS

1. BEING WRONG
2. LOSING MONEY
3. MISSING OUT
4. LEAVING MONEY ON TABLE
 Anything can happen accept the unexpected
 There will be no effect of past trades on the future trade
 The trader should have unwavering faith in the uncertainty of the current opportunity
 The trader should have faith in the long term edge of his trading system which will give profit at
last

Every moment is unique every trade has an uncertain outcome

OTHER IMPORTANT POINTS:

MARKET CAN DO ANYTHING AT ANY TIME

ACCEPT THE RISK AND UNDERSTAND THAT LOSSES ARE JUST OF THE BUSINESS

RULES  RIGID ,, EXPECTATION  FLEXIBLE

GENUINELY ACCEPT THE RISKS & YOU WILL BE AT PEACE WITH ANY OUTCOME

ANYTHING CAN HAPPEN - FOUNDING BELIEF OF ALL NECESSARY BELIEFS