Saturday, October 23, 2010

Basic Mathematics of Trading

1) You + 0 = You

If you bet too small, you practically don't go far enough howsoever good you may be in trading.

Whatever small distance you cover doesn't take you far enough into the green territory to make you in the position to absorb any potential setback.

2) You x 0 = 0

If you bet too big or too recklessly then you are trying to multiply your present worth with zero which is sure to land you on the right side of the above mentioned equation!

3) You x 1.2 x 1.2 x 1.2 x 1.2 = 2U

If you bet neither small nor too big and with a method and with consistency, you have power of multiplied compounding on your side!

4) U/1.2 = 0.8U;

0.8U/1.2 = 0.69U

If you don't bet too big but have weak discipline or without method then you will keep slipping down. Power of division is working against you.

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