I’d like to be able to predict the outcome of every trade that goes out, but not every trade comes with an equal likelihood of success. This is where a little luck is of great help.
The biggest mistake I’ve been part of is just making too many trades and making the odds too huge.
I have a personal favorite trading strategy where the number of trades is the difference between the current price at the time a trade is placed and the price where the trade was made. At some point when every trade’s probability of success is taken into account, we will be at the minimum we should be at.
I know this sounds like a bit of a crazy idea, but every small trade is worth a lot of money.
I would be surprised to make a profit of less than 0.01BTC per trade when considering all the factors that go into this decision:
Market risk when a user makes the order
Risk of overpaying for the order to be placed
Risk of losing out to lower bid orders
Risk of being left out
Risk of overpaying for a better price
Risk to be wrong about the price change.
But there is a way to make this kind of risk mitigation, and there is one reason why I am willing to make such a trade even when there is a small chance of failure.
It is the difference between making a trade that will win one penny per trade (as opposed to 1 BTC per trade) and making a trade that will win a million dollars per trade or more.
The trade that wins one penny per trade will make more money than the trade that loses out to lower bids on a single trade. A trade that gives you 100,000% profit is not a trade that makes a profit.
This means that even though you make your trades for one penny per trade, you can see a profit in every trade.
One way we can predict this profit number is by calculating what profit a profit has been made on each trade.
What is a profit?
A profit is the amount of money that has changed hands for each trade that was made.
To put it in layman’s terms, if you have the risk and the opportunity, then a profit equals the difference in the cost of the risk and the profit per trade.
Let’s take a closer look at these numbers using the following scenario:
The trader will sell
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