As an average trader/investor if I take the opposite trade of my first idea, will I make a killing because 90-95% of traders lose money?
No because you are only seeing half the picture. You, like nearly all beginner traders, are thinking only in terms of getting INTO the trade.
Getting OUT of the trade is far more important.
Most bets that beginner traders make are IRRATIONAL BETS. Imagine a trader taking a 60% chance of a small win, equal to half his average losing trade. He takes 100 trades, risking 1% of his account each time. 40 times he loses 1%, and 60 times he gains .5%. After 100 trades and a lot of work he is down 10% in his account.
This is an irrational bet. Many traders place irrational bets because our primitive brains reward us with endorphins when we “win”. Many traders try and pick tops and bottoms in markets (even though it is not a good basis for trading) because this feeling of being right is so nice.
Compare with a rational bet. For example my core trend following system has a win rate around 50% and average win is approximately 1.2 times average loss. This is not a particularly impressive system, the long term expectancy is only .11 per trade, but it IS a rational bet with positive expectancy.
If we take the same 100 trades for 1% each time, I have 60% in wins less 50% in losses. After 100 trades my account will be up 10%.
Trading is NOT about picking market direction, but about placing rational bets.
Src : https://www.quora.com/As-an-average...lose-money/answer/Scott-Phillips-55?srid=dGAY
No because you are only seeing half the picture. You, like nearly all beginner traders, are thinking only in terms of getting INTO the trade.
Getting OUT of the trade is far more important.
Most bets that beginner traders make are IRRATIONAL BETS. Imagine a trader taking a 60% chance of a small win, equal to half his average losing trade. He takes 100 trades, risking 1% of his account each time. 40 times he loses 1%, and 60 times he gains .5%. After 100 trades and a lot of work he is down 10% in his account.
This is an irrational bet. Many traders place irrational bets because our primitive brains reward us with endorphins when we “win”. Many traders try and pick tops and bottoms in markets (even though it is not a good basis for trading) because this feeling of being right is so nice.
Compare with a rational bet. For example my core trend following system has a win rate around 50% and average win is approximately 1.2 times average loss. This is not a particularly impressive system, the long term expectancy is only .11 per trade, but it IS a rational bet with positive expectancy.
If we take the same 100 trades for 1% each time, I have 60% in wins less 50% in losses. After 100 trades my account will be up 10%.
Trading is NOT about picking market direction, but about placing rational bets.
Src : https://www.quora.com/As-an-average...lose-money/answer/Scott-Phillips-55?srid=dGAY
