87½% chance of profit!

How risky is stock trading?

Lets do some back-of-the-envelop quick calculation.

Suppose you buy a stock or index futures.

a) The price will either go up or down.

So, there is always 50% chance of it going your way.

That makes it 50% success chance assured.

b) If you bought when rsi had exhausted (i.e. severely over-sold condition),

that adds another 25% chance of profit.

This takes the total chance to 50+25=75%.

c) If u still land up with remaining 25%,

i.e. if the price still goes down

there is half probability of it coming back pretty soon.

This further adds 12½% of the remaining 25% chance of success.

Total now becomes 75%+12½%=87½% chance.

So, the assured success rate for a sensible trade (based on a method/system) = 87½%.

Chances of loss = 12½%

If u r using a stop loss, this 12½% will always be peanuts.

So, if you trade 100 times as per your method / system,

you will profit 87½ times (big +small)

you will lose 12½ times (small)

That is not a bad deal!!!

The key factor, however, is

the method or a trading system

which decides the entry as well as the exit point

and not the gut feel or emotions or tips!

Happy trading!