Found this as an answer on Quora.
Got some truth in it.
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A foundational BELIEF and intellectual comprehension that the outcome of any trade is random, in the same way that the outcome of any hand in blackjack is random, even when the shoe is beginning to favor the player or the house. There is no ‘certainty in the outcome’ in setting a trade. This is not a theory – it’s a law. Anyone thinking they know the outcome of a trade in advance does not believe in this law and is setting themselves up for a slew of problems. A trader must accept that winning/losing any trade or series of trades is part of the random nature of the market.
Just merely understanding this concept is helpful. Doing the math, seeing the results, back-testing, monte-calro analysis, just drawing colored balls from an earn…will teach you the cognitive part of this truth.
But BELIEVING that the outcome of every trade is random is the end state experienced traders want to achieve. Once you believe this law of the market, your behavior will change.
It’s like explaining gravity to someone who has never experienced weightlessness on a space station. No matter how smart they are and how many formulas they know about gravity and the effects of distance between objects of mass – they will not believe in the laws of gravity until they truly experience it for a while on a space station.
No matter how many courses you have taken in probability and statistics, you won’t truly believe in the random outcome law of uncertainty in the markets until you have experienced it on a grand scale. Your brain wants to believe there is a pattern, repetition, or some sort of certainty. It’s a survival mechanism. Your brain does not like to exist in an uncertain environment. It’s not suited for trading (or black jack). Which is why most traders eventually lose.
Most traders really don’t trade enough to experience the fact that you can indeed get 25 consecutive losing trades in a row without your system being broken. Yup – that’s right…25 in a row. Not probable, but also not impossible. Each day there are…say…1 Trillion possible market trades. In those trillion trades, there is a sequence of 25 losers. I guarantee it 100%. And every once in a while, some trader happens upon that series and is devastated. While hard to imagine a streak of losers like that, anyone will gladdly accept 25 winning trades in a row – and disregard the probability of that happening based on random outcome alone. The problem is that the vast majority of traders who have not internalized the random outcome of trades as a belief, will tend to blame themselves or the market for their losing streak, or tend to take credit for their winning streaks. But experienced traders will neither blame nor take credit – for they know it is just random luck (assuming their system is not broken for the market) of picking that particular sequence of trades out of a possible trillion trades available that day. It can make for a very good day or an extraordinarily bad day.
AND THIS UNDERSTANDING is what makes a ton of difference. The experienced trader (or prop shop) just keeps on taking every signal offered, without letting the results of the previous trade bias their next trade (assuming their rules allow them to continue trading after X number of winning/losing trades in a row). They may feel frustrated with a string of losses, or elated with a string of wins, but they do NOT allow those emotions to interfere with the rules of placing the next trade. If they do – they they will experience TILT, like 70–90% of traders, and the biases that accompany TILT will impair their ability to objectively place the next series of trades. Experienced traders (an risk management prop shops) have a keen sense of when they are susceptible to TILT and take a break to center themselves before taking the next trade. Because they believe in uncertainty so much, they are better able to manage their emotions so that emotions don’t take over their trading rules.
Oh – and once you believe in uncertainty…the outcome of events in life outside of trading start to take on a different optic. You will see that some of those overnight internet billionaires are not geniuses, just smart ambitious people who drew a string of lucky moves from the universe. And the same goes for the opposite. We tend to want to explain events with causality theories. But luck and uncertainty play a far more profound role in every aspect of our lives that we want to believe.”
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