Trading without knowing Mathematics is like trying to drive a car without gasoline; you will practically never reach your destination, which is success 🙌
Because Mathematics is important and how it applies in Trading. Let me explain what you need to know or master in Mathematics to understand Trading. These are the topics you need to understand in Mathematics.
Knowing Numbers up to Infinity
Sums
Restas
Multiplication
Division
Fractions
Percentages
Statistics of probabilities
Interests
Algebra
Geometry
If you handle these topics in mathematics, you surely have many opportunities to win in trading because, thanks to this knowledge, winning in trading is not complicated. However, mathematics is not the only thing you need; there is also a bit of discipline, psychology, creativity, and philosophy.
But it is not necessary; knowing how to add and subtract is enough. Who does not know about money? Obviously, everyone handles it perfectly. You might be thinking, but in reality, it is not like that. There are people who can only distinguish amounts up to a million, and that is a terrible disadvantage for them since they do not know what number 53,670,080.07 is. Reading prices becomes difficult, and they do not know if it is a lot or a little. Daily, the market liquidates a total of 100M; many surely do not understand this. This makes them act in the markets blindly, so it is necessary for them to learn about large numbers.
Well, yes, but everyone knows how to add and subtract; they would realize and could do their calculations to win. They do not need a type of advanced mathematics. You might think, but in reality, it is not just about adding or subtracting. Your portfolio is about knowing how to calculate and add or subtract large portfolios that handle the asset you are going to study. It is not a simple addition or subtraction of 10+10 or 100+100; we are talking about large amounts that come in and out of the market, which an analyst must calculate when investing. If you do not know how to add or subtract, you could not enter at the right moment; it would be like investing blindly.
Multiplication as it is applied in trading.
In trading, multiplication is used when you are going to multiply the amount of stocks or cryptocurrencies you are going to buy using leverage. Here we have some data from a publisher that we will use as an example.
Here we use mathematics to explain; first, we must multiply leverage by margin. The multiplication would be like this: 25 x 196. We use the calculator and get the result, which gives us a total of 4,918.25. This was done on my phone's calculator. If you think it is not real, take your calculator and perform the multiplication on your own to verify if the result is correct.
This is strange because in the publication the result is seen in the size that gives us a result of 19,201. Here is where being an expert in mathematics saves you from a trap, because if you notice this image that is published, it could be false, since Binance has a system where mathematics does not fail. It is impossible to blame Binance for having made a bad calculation and giving more money than it should.
But it is true what he says, it is possible to win a million dollars with 100 dollars if the coin falls to zero, because the answer is no, that is false. What he says also in short selling, as you know it, there is a limit and that limit is zero. A cryptocurrency that falls to 0.00000 is the final limit in percentages, which would be 100%. This means that if you multiply 4918.25 by 100%, the maximum you can win is 4918.25, no more than that. And according to the publisher, he will be a millionaire if it falls to zero 😅 which mathematically is impossible, and not knowing is one of your weaknesses.
So this is how multiplication helps you calculate your profits; it not only helps you avoid possible financial fraud where impossible profits are promised that exceed the logic of mathematics and harm those who believe and follow them. This is not for you to search or report this type of publication, but rather for you to learn and be analytical when believing a publication; this is simply educational, so take it easy.
Follow me for part 2 and teach you how to apply division in your trading plan.