I have been trading a while and met a pro trader (for a bank) the other day. It wasn't a pleasant experience. He knew so much about markets, economics etc and it made me feel pretty small and ignorant. He seemed to think that without years of knowledge of economics and a team of people analysing the fundamentals it is impossible to make money trading. He thought that all day traders were just gamblers.
There are professional gamblers that make good money. They understand the odds, what situations give them the greatest advantage. I'm thinking about games like craps, blackjack, poker, where there IS strategy.
Forex is very similar. You use a strategy to put the odds more in your favor. It sounds like the professional was implying day trading is like flipping a coin. No. Even in gambling there are strategies.
Most traders think in terms of individual wins and losses but you are right the focus should be more about probabilities. Trying to wait until the odds are staked in your favour is the best strategy but there can always be losses even in this situation
According to FXCM, 79% of traders lose money in CFD and Forex market. Why?
Because trading is about odds. And odds are math, not emotions.
You see a support line in EURUSD at 1.121, and a resistance at 1.143. Prices were at 1.140. You think, prices are going up, let me buy this stuff. Your emotion took control and you saw only the possible profit in a breakout. A pro trader would take the risk (30 pips) to sell this one. After this sell, he would close 50% of his trade at 1.136 (another support), and keep the rest of the trade with zero risk. Near 1.121 he would buy this stuff. If prices brake 1.121, he would sell the breakout.
Remember, 70% of time, prices keep ranging. Trade brakes or bounces. Mostly bounces than brakes. If your emotion, fundamentals and news tell you sell, look for a good support with tight SL to buy. Small SL means that a small bounce gives you 2:1 or 3:1 reward/risk.
In the long run, you will realize that math is in your favour
It is not easy to trade like this. Because your winning ratio will be near 30%, if you use 3:1 reward/risk. But after 100 trades risking 1% of account, you will get 20% return.
Trade safely... Remember, a high Drawdown means a high risk!