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Is it bad luck if there is traffic on the freeway between you and your destination?
When I drive to see my grandmother, 200 mile trip, I do it on the weekends because if I did it on the weekdays the traffic would add hours to the trip. I don't consider the traffic as bad luck, I just consider it planning (or experience).
If you are in a trade that is touching your target limit order, you should probably know not to give it much room. If you give it 4 ticks room to get that last 1 tick profit, that is a pretty poor risk-reward. I do not consider it luck, but planning (or experience).
I fully understand what you are saying with your post. But too many people use luck as a scapegoat. They blame luck when things go badly, even though the person is usually in direct control and has direct responsibility for allowing those outcomes to come to pass.
For example, it is not unlucky that you hold a position over the weekend, and have a huge gap down on Sunday that costs you thousands of dollars. If that outcome came as any sort of surprise to you, then it was poor planning or lack of experience. In other words, do not blame this on bad luck.
If on the other hand, you are well educated and experienced and decide to still place that trade, holding over the weekend, and it gaps down on Sunday - I don't think you would say "bad luck", but simply "poor result". It's not even a bad trade, after all, if the trade was setup and executed as you had intended. Often you can have great trades that are not winners. And more often, you can have terrible trades that were winners.
There was an excellent post, which unfortunately I cannot remember who posted it or find the link to it on futures.io (formerly BMT), but it summarizes how I believe luck really plays in to trading. It went something like this (numbers made up to illustrate my point, because I can't find the original material):
- 100 hedge funds start out by flipping a coin. Heads = long, tails = short. 50 funds are long, 50 funds are short.
- 1 year later, 50 funds are profitable, and 50 are not
- 2 years later, 25 funds are profitable, and 25 are not
- 3 years later, 13 funds are profitable, and 13 are not
- 4 years later, 6 funds are profitable, and 6 are not
- 5 years later, 3 funds are profitable, and 3 are not
- 6 years later, 1 fund remains as profitable - just from the sheer numbers of chance, without considering any kind of skill or edge.
Using poker as an example, every poker player knows luck is involved in each hand, no escaping that. Over a sample size of play time, it becomes apparent who the more skillful players are by their winnings. The player that wins the biggest pot is not always the player that wins the most hands either but both indicate skill by the way they manage their luck.. and don't forget, all it takes is one screw up/one momentary lapse in judgement and the tables get turned..
I am quoting you so I feel like at least there are two of us...
Luck. Not a popular word among traders. Equated with gambling... but to me, gambling has less to do with luck and more to do with percentages. There are a set number of cards in a deck, a specific payout ratio of black or red on roulette. Meanwhile, trading has an unlimited number of factors driving the outcome. Will the S&P hit 5000 or 500 first? Are you sure? Prove it, mathematically.
Luck cannot make up for any major sins in trading, but ultimately, unless you black-box trade, your view of the world, your view of yourself, will affect your approach to trading. And that view can make a difference.
What if the term "luck" had more than a single definition? The interpretation of events without causes, that is not what I am suggesting. There really are no uncaused events. But feeling "lucky", believing that an opportunity is there for the taking, possibly re-labeling it as "optimism", or focusing on what you want and not on what you don't want, that attitude can be a game changer. "Lucky" people see opportunity where "unlucky" people see nothing special. Every day there are so many opportunities, and feeling "lucky" or "unlucky" can determine how you view them, or if you even see them at all.
Trading is an individual experience. Put two great traders together, and if they always had to agree they would most likely lose money.
Never think for a minute that luck alone will save you, but it does not hurt.
Beautiful, I laughed more than once. Great quote from it "...in the markets, unlike in the physical universe, the rules of the game can be changed." Apply that math to poker.
even farther I consider misfortune as a opportunity i.e. if I get fired from my day job I know I will focus harder on my trading and will make more money at the end.
yes, trading has an unlimited number of factors driving the outcome but there are only two outcomes: you either win or lose -- ok maybe you get even - but that will be luck
