TRADING PROBABILITIES

What chance do you have to make loss or profit?
Gents,Probability is a great thing. you can discover in advance what is likely to happen.Suppose you bought a trading system which can give you a success rate of 65% or a winning percentage of 65%First look at failure ratethis means, the odds of your making one loss are 100-65=35%The odds of making two consecutive losses are=35%*35%=12%the odds of making three consecutive losses are=35*35*35=4%the odds of making four consecutive losses are=1.5%the odds of making five consecutive losses are=0.5%the chance that you make loss 5 times one after another is almost 1%the chance you make loss three times is 4%.sO MOST PROBABLE IS YOU MAY LOOSE TWO TIMES.NOW Look at winning sideTHE ODDS OF ONE GAIN ARE=65%the odds of two consecutive gains are=65*65=42% success (chance to fail =58%)the odds of three consecutive successes are=65*65*65=27.5%the odds of four consecutive successes are=18% (chance to fail 82%)the odds of five consecutive successes are=12% (chance to fail 88%)you may have max 2 gains one after another=================================Now if you take 4 wins and 6 failures,net result will be65*65*65*65*35*35*35*35*35*35=0.03% just less than 1%the odds of having 5 successes and 5 failures are65*35*65*35*65*35*65*35*65*35=0.06%Now you can imagine what can happen if you have a system with 50% success rate!!!! more loss is likely than gainso it is the winning edge that counts a lot.Ramesh151