▼Trading probability and profit-loss ratio

There are two concepts that need to be understood more:

One is probability,

One is the profit-loss ratio.

The most important concepts in trading are these two concepts. Not only trading, it will be of great help to many things in your life. The underlying logic of most things is probability and profit-loss ratio.

For example, if you can’t find a girlfriend, how do you find one? If on average 5 out of 100 girls like you, that is to say, on average only 1 out of 20 girls will like you; the probability is constant, 5%; there are two ways to increase your chances of finding a girlfriend;

1. Increase the sample. If you are an otaku and don’t even know 10 girls, naturally you can’t find any. You need to go out to meet more girls. The more you know, the more likely you are to meet a girl who likes you.

2. To increase the probability, you need to improve your strength or appearance, such as learning to dress up, working out, working harder to earn some money and buy a good car... In this way, 5% of girls who like you may become 20% of girls like you.

The profit-loss ratio means that when you consider everything, how much you pay is how much you can gain. Only when you can gain more than you pay, is it worth doing, and you have to do one part of the work and three parts of the harvest.

So why is it not worth stealing batteries? Because the profit-loss ratio of stealing is too low. How much can you sell for stealing batteries? And getting caught is almost inevitable. For a few hundred yuan, you will go to jail for several months and a half. The profit-loss ratio is too bad.

On the contrary, if you look at the economic crimes of illegal fund-raising, which can cost hundreds of millions or billions, they will only serve a few years in prison, and they may not be caught. In those days, a few people were caught in p2p.

When you are chatting with a girl and you say three words to a girl and the other party doesn’t respond to a single sentence. When you take someone out on a date and you spend thousands of dollars without even getting a hold of her hand, this is all because the profit-loss ratio is too bad. You need to stop the loss in time. Don’t As a licking dog.

Trade with a high probability of being right and with a high profit-loss ratio!