In his latest book, Skin in the Game, Nassim Taleb runs an interesting thought experiment where he talks about two cases of playing the casino.
Equate the first case with ‘stock market trading’ in general –
…one hundred people go to a casino to gamble a certain set amount each over a set period of time, and have complimentary gin and tonic. Some may lose, some may win, and we can infer at the end of the day what the “edge” is, that is, calculate the returns simply by counting the money left in the wallets of the people who return. We can thus figure out if the casino is properly pricing the odds.
Now assume that gambler number 28 goes bust. Will gambler number 29 be affected? No.
You can safely calculate, from your sample, that about 1 percent of the gamblers will go bust. And if you keep playing and playing, you will be expected to have about the same ratio, 1 percent of gamblers going bust, on average, over that same time window.