Trading in the Zone by Mark Douglas

Author:Mark Douglas [Douglas, Mark]
Language: eng
Format: epub
ISBN: 9780735201446
Publisher: Prentice Hall Press
Published: 2001-01-01T05:00:00+00:00

CHAPTER 7

THE TRADER’S EDGE: THINKING IN PROBABILITIES

Exactly what does it mean to think in probabilities, and why is it so essential to one’s consistent success as a trader? If you take a moment and analyze the last sentence, you will notice that I made consistency a function of probabilities. It sounds like a contradiction: How can someone produce consistent results from an event that has an uncertain probabilistic outcome? To answer this question, all we have to do is look to the gambling industry.

Corporations spend vast amounts of money, in the hundreds of millions, if not billions, of dollars, on elaborate hotels to attract people to their casinos. If you’ve been to Las Vegas you know exactly what I am talking about. Gaming corporations are just like other corporations, in that they have to justify how they allocate their assets to a board of directors and ultimately to their stockholders. How do you suppose they justify spending vast sums of money on elaborate hotels and casinos, whose primary function is to generate revenue from an event that has a purely random outcome?

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