Thursday, June 13, 2024

HomeStock MarketLearn from my 69 trade win streak

Learn from my 69 trade win streak

Good morning, grab a coffee because I have a good lesson for you.

A big focus of mine right now is figuring out the best way to grow a small $2,000 balance.

I’ve been throwing mud at the wall for a better part of the year to see what sticks.

Growing a $2,000 balance is hard so the trades need to have high probability of winning.

The variables I use to define my edge all tie back to stacking probability.

This is how I just won 69 straight trades in this $2,000 balance before a loss Thursday.

And have a 92% win rate across 141 trades.

Exactly what does it mean to trade with high probabilities?

And why is it so essential to one’s more consistent success as a trader?

How can a trader produce consistent results from an event that has an uncertain outcome?

The answer lies within the gambling industry.

Corporations spend hundreds of millions on elaborate hotels and casinos.

Day after day, year after year, casinos make consistent profits on an event that has a random outcome.

Casino owners produce consistent results because:

  1. They keep the odds in their favor
  2. Achieve a large enough sample size of events

To illustrate, let’s look at the game of blackjack.

In blackjack, the casinos have a roughly 4.5% edge over the player.

The casino will generate net profits of four and a half cents on every dollar wagered on the game.

That 4.5% might not sound like a lot, but let’s put it into perspective.

Suppose $100 million dollars is bet at all of a casino’s blackjack tables over the course of a year.

The casino will net $4.5 million.

Each hand is a random event, independent of every other hand.

But on a collective basis, the opposite is true.

If a large enough number of hands gets played, the outcome is no longer random.

As a trader, the takeaways are:

  1. One’s trading strategy should keep the odds in your favor
  2. One must achieve a large enough sample size of trades

I used to be a boom-and-bust trader.

I would make large sums of money over long periods of time, but then give it back.

I wasn’t focused on keeping the odds in my favor.

So I challenged myself to fix this and started the $2,000 Small Account Journey.

My assumption was to keep the odds in my favor and achieve a large sample size.

I figured as long as I did that, it didn’t matter if I started with a small balance, in theory, it should get bigger.

Since November 13, when I started the current $2,000 balance, I’ve kept the odds in my favor with the strategy Small Account Journey uses.

And I’ve achieved a large enough sample size of trades at 141.

The result has exceeded my expectations.

I won 69 straight trades through Thursday, when the streak broke with a loss.

Results not typical. Trading is hard. Nothing is guaranteed.

On a micro level I never worry about any one trade.

Because on a macro level I know the strategy I’m deploying keeps the odds on my side.

When a loss does come, I’m unemotional because I understand its place in the process.

What the casinos have taught me has changed the way I see trading.

You are learning what it means to own the casino.

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