Saturday, September 18, 2004

Trading is a game of probabilities.

Imagine we're flipping a coin. Heads I win one dollar - tails you win one dollar. Simple. Heads and
tails will each come up half the time, and we'll both neither win nor lose.
However, unknown to me, you have a loaded coin. For every 100 throws, heads comes up 49 times,
and tails comes up 51 times.
You now have a license to print money. Let's call it the "Tails Trading System".
All you have to do is sit back and bet on tails forever. Eventually, you'd win all my money (and anyone
else's who took you on).
All any trading system gives you is an "edge". A favorable bias. Something that is more likely to
happen than not.
Whatever trading system you use...

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