Everyone has this misconception that trading is a risky sport. That you put in your money, and there is a chance that you can lose it all.

This really can't be further from the truth. In this post, I'll explain why.

When you trade, there is always a 50-50 chance of your winning or losing the trade. This is how it has always been.

But what if I told you that you could actually have a 100% chance of winning, and a 0% chance of losing?

Well, you'd probably say I'm full of bullshit. And you're right. There is no way you have a 100% chance of winning.

But you have a 90% chance, and I'll show you how.

The theory: The principle of big numbers.

Trading is like flipping a coin. You get either of two results, and you either lose or gain money(if you bet on the coin flip).

And, probability plays a role in both acts.

When you flip a coin, there's a 50% chance it hits heads, and ditto for tails.

But it was found that when you had a sample space of 10, this wasn't always the case.

Normally, you should have an equal distribution of heads and tails. That is 5 heads, 5 tails.

But I could flip a coin and have it land on heads 10 times in a row. This doesn't make sense.

Why? The sample space is way too small for the laws of probability to come into effect.

It was found, by the principle of big numbers, that increasing the sample space to 100 brought about an even number of heads and tails. Probability came back into play because of an increased sample space.

Now, back to our trading talk.

Am I saying that you should jump out and trade 100 times to see an equal win to loss rate?

No. 

Most traders dump a trading plan and move on to the next one because it wasn't profitable after 5 trades. Then they dump the new one because of the same reason.

My point is that it wasn't the plan that was bad per se. The plan didn't work because they didn't test it in a wide enough sample space.

The point is that any trading plan, even buying on impulse will give you a distributed and equal number of both wins and losses after being tested over a wide sample space.

So bringing it all back together: The principle of big numbers has proven that you can't actually lose all your money in the market. At worst, you can only lose 50%.

But since this isn't a coin flip, with constant practice and a keen eye to notice patterns, you would definitely be able to up your game, and make more than you lose.

Thanks for reading.

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