Our job as a trader is simply to execute our game plan flawlessly like a casino, day in, day out, without any bit of emotional discomfort. One loss, or even a series of losses are bound to happen but they are simply a part of the overall business plan.
Let’s take a closer look: How does a casino operate? How does a casino justify its millions of dollars of investment in a game that ostensibly has a random outcome? How does this business of gambling make money so consistently for the house? The fact is that: A casino is never worried upon which table it might win & which one it might lose. The casino has just invested money into a business model where it enjoys a tiny edge over the gamblers. This edge could practically be as slender as merely 4.5%, i.e., for each dollar played on the table, the casino itself will earn a tiny 4.5 cents on average. (This figure may seem paltry, but actually it is not. If 100 million dollars is bet in a game of roulette every year, the casino is going to earn 4.5 million dollar in that year from that particular table!) This figure of 4.5% profit is the net result of all the big wins to all the big losses and every winning & losing streaks in between. Hence, the casino does not make any attempt to ‘guess’ the outcome of any of the individual bet, it only keeps the shop open 24 hours a day for the gamblers to come in, enjoy free drinks & play a game of negative expectancy for them! Thus, a large enough number of games are played facilitating the small edge of the casino to play itself out again & again. And, in the long run, the casino becomes a net winner.
Likewise in our trading operations, neither there is any way for us to know, nor we need to know, the outcome of any of the individual trades. Really, that does not matter either. What matters is that, just like the casino, we too shall create for ourselves a trading model with a positive expectancy & keep playing the game, again & again, exactly as planned. Any deviation from the game plan will be a serious mistake. Is there any way for us to really ‘know’ the outcome of any of individual trade? No. But we do know that over a large number of trades our edge will play itself out & we shall be net winner in the long run. That’s how the trading game is played! Exactly like any other business!
The motto of the whole story is that:
(1) You have to be confident of your system, love your system. Only then, you shall be able to act on every single trade generated by your system without fear of losing.
(2) Behave like a casino & acknowledge that every individual signal matters. Do not deviate from your trading plan.
(3) Be rigid in following your rules & be flexible in your expectations.
