Interesting to know

Life like game: probability rules

Sooner or later, any trader finds oneself in a situation described by the wise saying: Life is a game! Being involved in exchange speculations, market participants understand it has a lot in common with gambling. In other words, steady profits sometimes depend on a stroke of luck, but not only good judgement, analysis, and a vision for further market moves. How important is good luck in a gamble and exchange trade, these two activities accompanied by drive and risk? Let's expand on the probability theory.

Making first steps in the currency market, a trader aspires to gain steady profits. How can he measure the probability that he will achieve his ambitions? Some scholars believe the probability phenomenon is linked to the systematic work with the unknown, insights into different scenarios, and a contingency plan in case feasible scenarios fail in practice. Life consists of a string of unexpected events. However, it is possible to estimate the highest probability that a certain move will bring success.

In fact, a probability is estimated in any professional activity. It is of great importance to marketing companies, investment firms, government agencies, manufacturing companies, healthcare, and public catering. For example, a company can find out whether buyers like its product and whether it can be sold online. If the company is right, it will earn a profit. Otherwise, it will incur losses.

A brokerage firm estimates a probability every day, when making a lot of decisions. A broker is always analyzing how a price of shares will change, what position should be opened: long or short, and what feedback should be given to clients. A broker's operation aims at gaining an advantage. The first step to take an advantage is to grasp the basic probability rules and how they can be used. The probability theory suits well for long-term forecasts, but it works badly in the short run. Indeed, in the long term, you understand that if a probability of something does not equal a zero, it will happen sooner or later. Moreover, you can even estimate how long you have to wait. Nevertheless, the exact time when an event happens is in question. That is why the probability theory is so exciting and keen traders do not want to leave the market.

Speaking about rare events, people figure out a probability of their happening from many different angles. A forecast depends on the event's essence and its emotional shade. In case of a positive event, people welcome good luck, for example they believe in winning in a lottery. On the other hand, people tend not to believe in a bad scenario, for example, that a lightening will strike a stadium with a large audience. Experts are certain it is hardly possible to convince a person who won a large amount of money that the probability of this winning is tiny.

Forex traders should not rely just on a stroke of luck even after a series of gainful deals. Likewise, a gambler who has hit a jackpot is unlikely to be equally lucky in the next game. A probability does not have a memory. Therefore, traders should not relax and hope for good luck. The bulk of success depends on nonstop improvement of expertise and skills, careful analysis of a market situation, and financial news monitoring.

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