Firstly let’s just assume someone doesn’t do any analysis or look at any charts he just random puts in a buy or a sell position on any random pair.

What do you think will happen? He’s probably going to lose all his money right? Yet this doesn’t make sense because based on the theory of probability he’s supposed to make 50% of the time and lose 50% of the time. Then there should be equal chances of him making lots and lots of money and him also losing all his money getting his account broke. Yet you notice somehow this doesn’t happen at all. If there was such a person doing these types of trades just simply buying or selling randomly he probably has like more than a 90% chance of losing but based on the theory of probability that shouldn’t happen.

Now most people don’t trade like that. Some traders probably don’t really know a lot about the fx markets and the related markets but i would say most of them would have at least a bit of knowledge like they would know some technical analysis or know how to read about the news etc yet despite all of that the majority of them lose money. It is as if the market has that edge on all traders yet this doesn’t make sense at all because based on the terms of probability the stats should show that fx traders are half half which means half of them make money and half of them lose but no it’s more like 90% lose.

Personally for me i do make calculations and reading on charts, news etc but yet it seems that i am mostly on the opposite side of a trend which means i lose money on a trend that means the trade is going against me and i rarely ride a trend which against goes against the theory of probability because of my studying of the charts and everything. You guys see what i am driving here? It’s just like the provobial flipping of the coin heads you win tails you lose you would expect to hit 50-50 right? Yet if the flipping of the coin were to be used to represent the fx markets most ppl would come out tails 90% of the time.

Do you realize that you have answered your own question?

Nine out of ten traders trade the way you do. The other one out of ten is on the right side of the trend, and he scoops up all the money (except spreads and commissions) that you guys lost.

So, you see, it’s not a case of there being a winner for every loser.

It’s more like there is one winner for every nine losers.

But, the books are still balanced. It’s a zero-sum game.

Just like the zero’s on a roulette wheel, so to spread turns what should be a 50-50 chance in favor of the banks. So is a roulette wheel rigged, yet we still choose to play.

quite right. the spread sways the odds against the trader.

also for it to be truely 50/50 you would have to place a stop loss and take profit an equal amount of distance from your entry price. some traders like to trade risk reward ratio’s of 1 to 2. imo you are more likely to loose like this. instead of it being 50/50 on your trade reaching your take profit, with a risk reward ratio of 1:2 it is probably more like 25% of reaching your take profit before hitting your stop loss.

if you trade with a RR ratio of 1:2 then you need 4 wins out of 10 to avoid going negative and be in the positive.

if you trade with a RR of 1:1 you need 6 wins out of 10 to avoid going negative and be in the positive [i am taking the spread into account here]

obtaining a winning rate of 6/10 with a RR ratio of 1:1 is easier than obtaining a winning rate of 4/10 with a RR ratio of 1:2 IMO

I won’t actually bother looking at the replys but answer directly. First off probability is correct roughly 100 trades will produce 44 winners 56 losers in some cases it will be the reverse or skewed either side of that ratio. Meaning you should assume 70-30 Loss to win ratio.

So the issue here is how many losers can you take before your winners show up. Meaning that you still have to decide a fixed dollar amount on your losses, this should allow for at least 8-10 straight losers, secondly you need to have winners that are are at least 3 times greater than you average loser. E.g. after 10 losses you will be down say $1500 if your next trade was a win you will down $1050, etc. The theory is if you can experience 10 straight losers then you will experience 10 straight winners (note all trades are random).

Dr Van Tharp tested random trades on equities and turned a profit. So it is possible but he also had specific risk reward parameters. However, your assumption is the markets are random and more so efficient. It is the inefficiency of markets that allow for profits. What traders train for is to find the inefficiency, through technical analysis and information gathering. This bid to spot when the market is out of equillibrium is what eventually structures the market, the more players involved will mean the structure is likely to be a constant changing sphere depending on the participants.

This is why they say you can never beat the market in the long-term. It is likely that 20 years from now all technical analysis pioneered now will be made redundant by new participants.

To conclude, random trade theories are likely to fail because markets are not random the likelihood your random trade is on the opposite side of the order flow is great leading to larger drawdown which may eventually wipe you out. Secondly, markets are not efficient, so some players will naturally have better endowments and superior information and technology, this means you have to trade at optimum conditions, i.e. conditions when price is furthest from its perceived equillibrium price. Such trades can only be found at certain price levels that constantly changing so price analysis is required for successful trades. Lastly money management is essential when determining exits of trades, your exit will be at the markets preferred new optimum equillibrium price. Determining this also requires analysis, so if your trade was randon, how would you know were to exit the trade? So your exit would be random and out of the markets optimum exit. Essentially your random trade was taken at a non-optimal point and should never have been taken.

All of sudden trading requires skill and logic and understanding of the order flow and optimum equillibrium levels. Suddenly, you need to have some working knowledge of the economics of markets and a head for finance and money management not forgetting some kind of mathamatical skill.

Do you still think the markets are rigged? You and all traders are the market… You just need to find your own optimal trade points based on structure analysis.

For me understanding the probabilities are important. Spending countless hours going back through price charts until your eyes are bleeding and understanding the probabilities of price movements can give you both a psychological and statistical edge. I think it is this kind of hard work that helps in making a trader successful by understanding and having confidence in the probabilities and expected outcome of their trades.