It is assumed that if we want to do something on the market, we must have a specific plan and act as chaotically as possible. It is said that you always need to know how much you risk and how much you can earn on a particular setup. Is this really the case?
In most cases, yes, but not entirely. Playing the same every day can be disastrous and in this article I will explain why this is so and you should modify your approach or assumptions quite often. At the beginning, let's consider whether the market always behaves the same? Is there a pattern that you can copy day by day and always make a profit in the long run? I mean 100% rigid assumptions about when we get in and when we get out of a position. If you answered the above question “there are no patterns in the markets” then bravo! If diagrams existed, everyone would copy them. The market does not always follow a pattern, so it is illogical that we also always play exactly the same knowing that the market today will probably behave differently than a week ago.
How to understand this on an example?
To understand this better, I will use an example. Imagine you are a player who takes penalties the same way by shooting in the middle of the goal. Mathematically, you have a 66% chance to score because you only have three options - left, center, right. But remember that the goalkeeper is a living organism that prepares for the opponent before each match and knows perfectly well that you shoot in the middle 100% of the time. In such a situation, when we take into account the fact that the goalkeeper is a thinking man, and not the math itself, it turns out that the real chances of missing the eleven increase. Of course, that doesn't mean you have to close your eyes and hit the goal with all your might, hoping it will come in. You have to know how you want to shoot, but you can't always shoot at the same spot.
Too much about football, but I hope that the example is understandable to everyone. We can't always play exactly the same because our systems work periodically. We can earn for several months and then release everything because the market has changed the rules of the game. By changing the way in / out of position from time to time, we do a kind of dodge before harvesting our stop losses. A lot of people at the very beginning of the adventure with investing have really very good results because such a trader behaves in some way irrationally and plays without any system. It's like you are a professional boxer who expects a professional fight, and a rookie enters the ring who, due to his lack of coordination, makes completely unexpected moves. Of course, as a professional you cut out a rookie, but at first you might be in a slight shock.
