Increase your WIN probability in the stock market.

Most of the traders in the stock market are doomed to fail. Why? It is because they enter trades which have less than 33% probability of making profits. So in the long run for every 100 trades you take, you only make profit in 33 trades and losses in the rest 77 trades. That is not a very promising picture for anyone.

The idea here is to primarily shift your focus on increasing your odds to make profit by changing the type of orders you execute. Let me explain.

Buying a share or an option (WIN Probability < 30%)

Most of you are familiar with buying a share in the stock market. The intention here is to sell the share at a higher price in the future. So the direction the share price has to go is UP. But there are two other possibilities too, the share price can remain the same or go DOWN. In both cases you don't stand to gain anything.

Buying an option is also similar since the only way to make money is when the prices go up. So out of three outcomes you make money only if one outcome happens, hence your WIN probability is 1/3 rd or 33 percent.

This is the unfair setup where small traders like you and me get into when we place our orders. We feel all the research and chart analysis is going to save us but to start of, the game itself is rigged against us.

Selling an option (Win Probability > 66%)

So how do the rich and powerful change the game in their favor, they simply sell options in the market. Let me explain in simple terms.

When they expect the prices to rise, instead of buying a call option they sell a put option. Why? So in the first case the prices have to go up only then they make profits as discussed earlier. But in the second case, they will make profits when the prices go up and also when the prices remain the same.

So out of the three outcomes if two outcomes happen they make money. Thereby increasing their WIN probability to 2/3rd or 66 percent.

But this requires huge amounts of capital to start with and most importantly if they get it wrong the loss is huge. Hence only people with deep pockets enter here.

Hybrid or Hedged Trades (Win Probability > 66%)

Now where does this leave us, the 'Aam Aadmi' or common man, who do not have huge capital but would like to increase the WIN probability in our favor. Enter Hedged Trades.

So these are a set of orders we execute whereby we can get the advantage of increased WIN probability with comparatively lower capital. As the name suggests these orders are hedged or protected hence even when the outcome goes against us, we are protected unlike the previous case.

So the minimum amount required to start off these trades in your own trading account is Rs.1 lac only and it would only require barely an hour of your time every week. If you are interested in doing something similar do reach out to me here or mail me [email protected]. Thanks & Share!