Eric Fry

If you flip a penny 1,000 times, it’ll land “heads” about half the time and “tails” about half the time. If you bet on “Even” 1,000 times at a roulette table, you’d win a little less than half the time (thanks to the “0” and “00” slots on the wheel). These probabilities are relatively simple and intuitive.

Stock market probabilities differ somewhat. Insight improves the odds. Lots of insight improves the odds greatly…over a long-term timeframe. But over the short-term, insight provides a very limited and unreliable benefit. “The markets can stay irrational,” John Maynard Keynes famously observed, “for much longer than you can stay solvent.”

That said, successful stock market traders tend to “win” about 55% to 60% of the time. This win percentage is not so different from that of successful sports bettors. Again, these probabilities make sense. If you possess relevant insights into the “markets” you are trading – be they S&P 500 futures or professional football games – you can improve your odds of success…a little. Chance and pure, dumb luck still play a prominent role…unless you happen to be a trader at Goldman Sachs. For reasons that neither logic nor probabilities can explain, Goldman’s trading desk “wins” more than 90% of the time…or at least it did during 2009.