Trading is a game of odds

The story of trading is the story of calculating odds. Odds is the calculus required in probabilities. Since the future is unknown to man, the future too is the story of probabilities. We can only speculate about the future. We cannot guarantee an outcome because the factors that drive human emotion, and therefore human actions, are too many and too variable for any certain predicability to be 100%. 

Trying to predict the future is an act of speculation, which means that a certain calculation of the odds of an outcome can be attempted. The word speculation comes from the Latin "speculari" meaning to watch, observe or spy out. In trading this is what we do. We watch the markets and observe human reaction, and then based on our observations, we assess the likelihood of certain patterns of behavior being repeated and bet accordingly. Since the outcome cannot be guaranteed, we need to have in place a risk control mechanism that will limit our exposure to any adverse response by the market in terms of the bet we just placed.

Since trading is also a game of skills, and usually a zero sum game, where the well prepared usually outwit the majority of participants. Thus a few gather the rewards taken from the many. Sometimes, in fact very often, the "second mouse will get the cheese." This means that a trader must be prepared to take the trade when his system signals him to do so, but he must also be prepared to stop out quickly and if necessary re-enter the same trade after the smart money (market makers) have scooped up all the stop loss orders. Often the market will then resume the direction anticipated the first time around.

Taking small losses quickly allows a good trader to be there for when the market does move as anticipated. The second entry often proves to be the real profitable entry.

Prepare your mindset for more than one attempt and your profitability will increase exponentially.