6.1 The Poker Principle
Annie Duke, world-class poker player and behavioral psychologist, explains the central problem in Thinking in Bets (2018): we judge decisions by their outcomes. She calls this "Resulting".
A poker player who loses with the best cards (80% favorite) still played correctly. A trader who acts against their own rules and happens to make a profit still acted incorrectly.
In trading: you cannot control the outcome of any single trade. You can only control whether you followed your process. Across many trades, a good process will produce good results — that is the only reliable path.
6.2 Expected Value Thinking
David Sklansky formulated the fundamental theorem in The Theory of Poker: "Every time you make a decision that differs from the decision an omniscient player would make, you lose money."
Translated to trading: every decision has an Expected Value (EV) — the average expectation across many repetitions. A +EV decision can lose in the individual case. A −EV decision can win in the individual case. Long term, EV always wins.
| Decision | Win Rate | Avg Win | Avg Loss | EV |
|---|---|---|---|---|
| Setup A (per plan) | 55% | +$150 | −$100 | +$37.50 ✅ |
| FOMO trade (no setup) | 40% | +$80 | −$120 | −$40 ❌ |
| Revenge trade | 35% | +$200 | −$150 | −$27.50 ❌ |
6.3 Outcome-Independent Strategy Evaluation
Mark Douglas writes in Trading in the Zone (2000): the difference between professional and hobby traders lies in the ability to accept a losing streak as statistical normality — not as failure.
For a strategy with a 60% win rate: what is the probability of 5 losses in a row?
That means: 5 losses in a row are normal for any strategy — they are not proof that the strategy is broken.
6.4 The "Good Process?" Checklist
Use this checklist after every trade — regardless of outcome:
- Was the setup valid according to my defined criteria?
- Did I execute the entry at the planned level (not too early/late)?
- Was my stop-loss defined before entry and was it respected?
- Was my position size aligned with my risk rules?
- Did I reach my target or had a valid reason to exit earlier?
- Was my emotional state at entry in the green zone?
If you answer all 6 points with "yes": it was a good trade — regardless of whether you made or lost money.
6.5 Long-Term Expected Value as the North Star
With a 60% win rate, avg gain +$150, avg loss −$100 (EV = +$37.50 per trade):
| Trades | Expected Profit | Probability of Profit |
|---|---|---|
| 10 | +$375 | ~72% |
| 50 | +$1,875 | ~93% |
| 100 | +$3,750 | ~98% |
| 500 | +$18,750 | >99.9% |
This is why discipline wins in the long run: with any single trade outcome, you can be unlucky. Across 500 trades with a good strategy and a good process — luck no longer matters.
💡 Use sTraderZ.com's performance metrics to compute your actual EV across the last 50+ trades — not to evaluate individual trades, but to see the statistical trend.