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Do you believe in luck in trading?
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Do you believe in luck in trading?

  #41 (permalink)
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Luck is when you win one trade. When you are still ahead after 100 trades it is skill, not luck.

Luck is the edge that gets eaten up by bad luck.

vvhg

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  #42 (permalink)
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rickey View Post
Absolutely there's luck in trading. Here's a couple of examples....

You plan your trade, place a limit order to enter. You're order is hit to the tick and you get filled without taking any heat on the trade. An instant winner. That's pretty damn lucky.

You're in a winning trade and the market is moving swiftly to your target. Everything is looking great. You're exit limit order is in the market just waiting to be hit. The market moves to your limit order, trades there briefly and reverses hard on high volume, leaving you unfilled on your exit. You end up giving back a point of your profits. That's pretty damn unlucky.

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.

Mike

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  #43 (permalink)
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https://futures.io/traders-hideout/15968-simple-directional-trading-profitable.html#post175704

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  #44 (permalink)
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Thanks Chris, you rock @websouth.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
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  #45 (permalink)
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Here is @websouth's post, which better reflects what I was trying to describe from memory.



websouth View Post
Now here's a side thought -
600 fund managers flip a coin. Heads they make profit for the year. Tails they lose it all and fold up shop. Let's not over analyze this and assume even distribution.
2nd year - 300 left
3rd year - 150 left
4th year - 75 left
5th year - 37 left
6th year - 18 left
7th year - 9 left
8th year - 4 left

Now the 4 money mangers left strut out and say "look I have made money 8 years in a row while others have failed. I know the markets - I am a market guru." Millions then flows into their funds. (from all the people who had money in the funds that blew up previously, right? They want to be with a winner)

9th year - 2 funds blow up
10th year - 1 blows up
11th year - last one blows up
repeat.

all on a coin flip. no skill. So luck vs skill I dunno

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

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  #46 (permalink)
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Big Mike View Post
Here is @websouth's post, which better reflects what I was trying to describe from memory.




Mike

Here is essentially the same idea from Warren Buffett The Superinvestors of Graham-and-Doddsville

"If I agreed with you, we'd both be wrong."
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  #47 (permalink)
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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..

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  #48 (permalink)
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Silver Dragon View Post
in my book, Luck is nothing more than seized upon opportunities. I believe you make your own opportunities (luck) in life. Those who go out and "do" have way more opportunities than those who "do nothing". Of course, once the opportunity is presented you still have to make good decisions on what to do with it.

Those who make a lot of bad decisions with opportunities are considered to have bad luck. Those who make a lot of good decisions with opportunities are considered to have good luck. These are extreme ends of the spectrum. Everyone else makes up the middle.

SD

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.

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  #49 (permalink)
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trendisyourfriend View Post
I found out this interesting story about luck, Coincidence, Probability and Risk:
No doubt that luck plays an important role in trading. Trading is about taking risks. Here's a fascinating story about two famous traders with differing attitude to risks and chances. [this is a must-read!]

Luck, Coincidence, Probability and Risk

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.

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  #50 (permalink)
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GaryD View Post

Every day there are so many opportunities

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.



GaryD View Post

Meanwhile, trading has an unlimited number of factors driving the outcome.

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

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