Hitting in the strike zone in the oil trading room

One of the keys to trading successfully is in taking trades that have a good probability of success.  This is one of our focuses in the room; having statistics to help us get caught in winning trades. It does not always work, but, when probabilities are on your side,  in time things are much more likely to work out than if you are stabbing at the dark in your trading. This is where the room adds value for any trader positioning himself in crude oil.

There are two types of realms one works in, in life. One, a deterministic one.  This is where you have exact information about where you are working. Navigation is like this to a large extent. For example.  You may know where you are, say at the corner of 5th and Vine Streets. You know if you go 3 blocks north and turn left and another four and turn right that your favorite store is on the right there.  This is a deterministic world defined by cause and effect relationships.

The other realm is a probabilistic one. In this kind of reality you have incomplete information. Further you may not even know your starting point for your journey (5th and Vine cannot be determined).  In this world you have probabilities of being able to get to a destination.

This is not dissimilar to what a baseball player must deal with in hitting the ball when at bat.  If you hit the right pitches, ones in the strike zone, your batting average (chance of success) will go up.  If you take lesser pitches, it will likely go down.  You could even become unemployable if you take bad pitches. Trading is like this world.  Below is a strike zone chart for Ted Williams. It shows what kind of batting average one is likely to get if only taking pitches in any given region of the strike zone.   Of course these days a batter has to actually swing before the bat leaves the pitches hand. This is similar to trading, but we can align things in our favor using statistics in the room.


Next time you take a trade, ask yourself where you are in the strike zone.  For Ted Williams, he'd rather strike out than to take a bad pitch and this made him of of the greatest batters of all time.  To learn more about, "The Greatest Hitter Who Ever Lived"  visit here: http://en.wikipedia.org/wiki/Ted_Williams  There are many corollaries to trading in hitting in baseball where probabilities rule that domain.