I was thinking about it the other day in terms of probabilities. Assume a stocks have equal probability of going up or down. Lets say prices are more or less coin tosses. After a sequence of trades (coin tosses) you would expect to be more or less where you started.
But if you have a trailing stop loss placed then that limits loss but not gains so you will make money. So lets say tails you loose at most 5%, but heads you get whats on the table.
If you then bias things further by choosing stocks that have a higher probability up than down (the coin is weighted) ie; they are in an up trend, you can further tip the statistical odds in your favor.
And finally if you choose your timing so you enter when they are at the bottom of their trend channel (higher probability of short term up) and exit at the top (higher probability of short term down) you are getting pretty well close to maximizing return
Anyway I have more or less managed to formally convince myself that over a sequence of trades the basic rules of the "Trend is Your Friend", "Buy Low Sell High" and "Always Keep A Stop Loss" will make money.
So you are correct success is simply a matter of minimizing mistakes and maximizing opportunity.
