Building A Successful Stock Investment System

In order to be a success in the world of stock trading- you need to learn how to think in “odds” of success. Additionally, traders must also realize that you can have 99% accuracy that a certain trade will be a success and still end up with a loss. Using the chances of success, you can alternate your trades based on the odds and deal with losses a little better. What you need is a stock market investing system.

Day Trading Probability for Beginners

While most beginning traders will stay away from the idea of probabilities and odds, it is precisely these concepts that contribute to the success of professional traders. Trading is the capability of managing risk in the stock markets- a place where nothing is 100% accurate and where nothing will successfully work 100% of the time. (If it did, we’d all be millionaires!)

When you take the time to determine the probability of being successful in a trade, you learn your “edge” and can increase your chances of a successful trade. When a trading system generates the opportunity for success of up to as high as 99%, there is still a 1% chance that the trade will not be successful. It’s up to the trader to figure out where a trade lies on the success scale- if it’s closer to the success side or the failure side, and then based on this knowledge, make adjustments to their trading.

The Trader’s “Edge”

What exactly is “edge” as it is related to trading odds? Consider a casino. You could say they have the winning edge over the players, and that is how they win such large amounts of cash even as some gamblers are winning sizeable jackpots. It’s only gambling to those who spend their money at a casino. The casino has the winning edge, and it’s a game of odds and probabilities where they can expect to keep just less than 5 cents out of each dollar spent in their establishment.

Think of a trader as one-person casino. If the trader loses a hundred dollars 20% of the time, and wins double 80% of the time, then they have the edge, and they average a net gain of $140 per trade. If on the other hand, the trader is only winning 20% of the time, then they need to improve their system and ratios in order to get and maintain the optimum “edge”.

Developing a Trading Method Based on Odds

Obviously, it is the goal of everyone who makes trades to become successful and increase their cash base. Even expert traders have losses, since there is no perfect method that works in every case in the business of stock trading.

It is impossible to tell whether your trades are successful until you’ve traded for a long period of time in order to produce statistics to analyze. With statistics based on your previous trade performance, you can create a stock market investing system based on odds and gain an edge that allows you to earn more than you lose. The idea is to run a trading business, and not be no more than a gambler at a casino!

What you need is to develop a way to have successful stock market investing.