Looking at Probability and Trading Success

Below is an exchange on Forex Factory, a forum for forex traders.

Originally Posted

* Without meaning to brew up more controversy, how do you guys measure probability objectively when starting out with a new system?
* Is probability really just a buzz word that distracts us from profitability in the end (i.e. if we focus on building profitability rather than probability, will we have a better chance of succeeding in trading)?
A: My opinion is that the best way to measure probability objectively when starting out with a new system is to test the system in a way that does not allow the system to be over optimized or curve fitted to past market conditions as hind site is 20/20.

One of the most basic things to do here is to come up with an idea and then have two blocks of data that you test that idea on, one that you run the original test on and look for legitimate ways to optimize and then one that you forward test the data on once the system is finished.

On the second question I don’t think that probability is just a buzzword however I do think that traders often focus too much of their attention here and not enough on money management.
Originally Posted

* What characteristics set a successful trader apart from an unsuccessful trader?

A: Here are a few:

Hard work and a willingness to spend a lot of time learning their craft
Ability to keep things simple
Willingness to take losses
Patience in down times
see each trade as the starting point

Originally Posted

* And perhaps most importantly, how does one maximise profitability in trading? What are the key components of a successful trading strategy?
A: Realize that picking your entry points is only part of the game the biggest part is money management.
Originally Posted

*Also, a number of other traders have mentioned that they trade with multiple brokers as a matter of course. Why is this beneficial? Do you feel it is an essential part of trading?

A: Because the foreign exchange market is an over the counter market the execution and pricing that you will get varies depending on the broker that you trade with. Some provide superior execution and pricing as a matter of course, some will be better when trading around news or in volatile markets etc.

Secondly because the FX market is over the counter your funds are not protected in the event of bankruptcy of a firm (UK firms are an exception to this) so many traders hold multiple accounts to avoid having all their eggs in one basket.