Simulation and TradingTraders predict future prices using some combination of fundamentals, indicators, patterns and past behavior. They hope that recent history can predict the future by helping them make some profits. The problem, however, is that nothing that has happened in the past guarantees favorable outcomes in the future. Fundamentally, the profitability of any trade has elements of randomness and uncertainty. Here's the problem: many people are not equipped with enough knowledge and tools to manage uncertainty, thus mastering the psychology of trading. At first glance, trading may seem rather trivial. Just look at the price chart, then buy here and sell there. But in practice it's much more complex than that. Trading is about what happened in the past while trying to predict what will happen in the future. However, no one can know the future precisely in advance. Dealing with random outcomes of each trade, trading is an exercise in probability, where a good trader influences the outcomes of each trade in his or her favor. Because, to be successful, a trader must have the odds on his side. Traders use patterns from the past to predict the future. Forecasts do not mean certainty, but they mean knowing the probable future direction of the market in which we operate. However, we can be sure that in the past, when the patterns, fundamentals or indicators were as they are now, then the probability was in our favor. At the same time you need to be very careful about your predictions and gut feeling about the direction of the market, so as not to fall into the trap of the gambler's fallacy when dealing with risk and uncertainty. Some traders have beliefs that are probably wrong. They say that after a series of losing trades success in the next trade is more likely, so the position size in the next trade should be increased. This may or may not be true in trading, but for most random events like coin flips, it is definitely not true. This implies that the probability of winning each trade is somewhat influenced by the outcome of the previous trade. This is not true for rolling dice, throwing coins, or drawing marbles from an urn: neither the coin, nor the marbles, nor the dice have any memory of the results..