60% probability of success is the best we can expect from a trade. Even if we think it’s a cert.
If we look at a trade and say, ‘yeah, I think that will definitely work,’ then the probability is still, at best, 60% that it will happen as we want it to happen.
On the other hand, if we look at a trade and say, ‘yeah, I think there is a chance of that working,’ then it’s a 40% probability.
In other words, the best we can expect is between 60% to 40% of being right in any one trade.
Therefore, our reward needs to be at least twice our risk in a 40% probability trade and at least equal to our risk for a 60% probability trade. Each of these make a positive traders equation.
Striving for trades that give a positive traders equation is the way to make money over a series of trades.
Achieving a positive traders equation is the most important thing to grasp, and do, as a trader.