As I always say, investment success comes from process ... Allow Probabilities to Dictate Your Investment Decisions [By Andy Crowder] By Andy Crowder
Sunday, April 25, 2021 [Bitcoin +$50k â Grab the #1 Pre-IPO:]( One global crypto exchange is preparing to IPO. Top venture funds and hedge funds are investing +$500 million. The stock could surge 352% after the IPO. [Go here for urgent crypto Pre-IPO details.]( As I always say, investment success comes from process. Let me explain. Back in my early 30s, when I was privileged to live in sunny Flagstaff, Arizona, I would take the reasonably short drive to Las Vegas so that I could make one of the best bets in the gaming world. For those not familiar with the game of craps, the free odds bet placed behind an opening pass line bet carries no house edge. The casino makes no profit on this bet. This is the only bet you can make on a table game where the odds arenât against you. How can the casino make this bet available when they donât make any money on it? Simple: Most players arenât smart enough to make this bet. Just like I do when I place a trade, I set a limit of $100 to gamble with on this occasion, thereby defining my risk. Of course, just like trading efficient options markets, I wanted to get as much mileage out of my $100 as possible. So I headed to downtown Vegas where the odds and minimum bets were the best.
I just wanted to have fun, but at the same time I wanted to maximize my time on the table, ultimately knowing that eventually the casinoâs small edge would catch up with me. It always does when the odds are stacked against you. He Tripled His Return Amazingly, I found a $1 table with 100 times odds within minutes of arriving downtown. And I quickly discovered a half-drunken gentleman who let it be known that it was his payday. He had managed to triple his paycheck over the past hour.
All I could say was, âAwesome,â and wished him continued success in his winning ways. But I soon noticed that his destiny was bleak. He was taking low probability bets at every turn. I, on the other hand, methodically played the pass line and maximized the odds behind each wager. I allowed probability to dictate my decisions. But my strategy, at least for the time being, was failing me. And to my left the half-drunken gentleman, who continued to move toward a complete state of drunkenness, continued to defy the odds by making low probability bets and winning. Every ârightâ decision I made quickly turned into a loser, while every âwrongâ decision made by my now drunken playing partner was a winner.
His loud drunken state had caught the attention of passersby. Several made comments such as, âWow, this guy is amazing,â or, âThis guy is good.â Of course, no one paid attention to my methodical and boring high-probability strategy, probably because I wasnât loud and boisterous. Why would they? I wasnât winning. What Happens With No Investment Strategy But I knew his fate was sealed. He had no process, no strategy. He made drunken bets based on zero statistical advantages. Yet he continued to defy the odds. Meanwhile, my statistical methods â making every bet to maximize my probability of success â were losing. And now it became even more interesting. The gentleman started to increase his bets. The end was near. I canât tell you how many times Iâve seen traders, particularly options traders, become overconfident after a winning streak and decide to arbitrarily increase their position size. This is often a recipe for catastrophic failure. Predictably, the gentleman eventually gave up all of his winnings and his paycheck. Sadly, his ignorance regarding probabilities had caught up with him. I, on the other hand, was back above break-even. I was down to a little more than $30 at one point, before the probability gods began to finally work in my favor. A Word to the Wise So, whatâs the lesson here? Spend more time focusing on the process and the strategy rather than the end results. Remember, if randomness was not a factor, every decision we make as investors would be based solely on the outcome. And if that were the case, the process or strategy would be judged solely on the end result. But as we all know, randomness is ever-present in investing, as it is in gambling. And although we are drawn to judge our investment decisions and those of others on outcomes, it is often dangerous to do so without some perspective on how they got there. This type of behavioral trait leads to a herd mentality and failure as a long-term investor. Probability and Investment Strategy Randomness can indeed teach us the wrong lessons.
But with a sound process or strategy, we know what to expect. Yet, most self-directed investors donât take the time to learn strategies with statistical advantages. They prefer to buy the stock, ETF or mutual fund that has recently performed the best. They have no systematic rules or process, just a hunch based on randomness. The drunken gentleman had no process and no discipline, and we saw his fate. The market is no different. This is why I love to trade options. I almost always want to act as the casino. I want to sell investors options with a low probability of success. Typically, I sell options with approximately an 80% chance of success. So, this obviously gives me an 80% chance of winning on each and every trade. I challenge self-directed investors to find a better investment strategy when investing in stocks, ETFs or mutual funds. Kindest,
[Ian Wyatt]
Andy Crowder [Urgent Cryptocurrency Pre-IPO]( One global crypto exchange is preparing to IPO. Top venture funds and hedge funds are investing +$500 million. The stock could surge 352% after the IPO. [Go here for urgent crypto Pre-IPO details.]( [Read more on DailyProfit.com]( [Take a 7 day break from these emails]( [Unsubscribe from these types of emails]( [Manage your email preferences]( [Wyatt Investment Research] Disclaimer & Important Information [Wyatt Investment Research (âWIRâ)]( owns and publishes the website WyattResearch.com, other web sites, and, through its subscription services, various investment newsletters, trade alerts, and other investment-related educational materials. Those publications are informational in nature â WIR is not your financial adviser and does not provide any individualized investment advice to you. You should perform your own independent research on potential investments and consult with your financial adviser to determine whether an investment is appropriate given your financial needs, objectives, and risk appetite. This publication should not be construed as an offer to sell or the solicitation of an offer to buy any security. None of the case studies, examples, testimonials, investment return or income claims made on WIRâs website or through its services is a guarantee of any income or investment results for you. WIR does not verify the income or investment results claims made in customer testimonials. Results for other customers may vary; for typical results, please see the Testimonial Support Page, linked below. Past success is not a predictor of future success. Trading in securities involves risks, including the risk of losing some or all of your investment. Hypothetical or modeled portfolio results do not represent the results of an actually invested portfolio and are not back-tested for accuracy under actual, historical market conditions. There can be tax consequences to trading; consult your tax adviser before entering into trades. For additional WIR disclosures and policies, please click the links below. [Terms of Use]( | [Privacy Policy](
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