Is Luck part of successful trading?

[User]

I was just reading other threads and I wondered if 'luck' is part of trading as a whole.

You can look at this from any perspective. You have an account of £1000.

A system or theory can be applied to a currencies, indices, commodity or shares and you could look at a chart as hard as you want and come to a 'true' conclusion as to if the market chosen will simply rise or fall. Now your first 10 trades could easily win or lose. If you win your account would be in a terrific position. If you lose then it’s even harder to get to breakeven as in percentage terms the task is more of a struggle.

Any views from other traders on if 'you' think Luck could be a critical part of successful trading?



:?:

 

[Dow Dog]

I think the key to successful trading is CONSISTENCY in everything.

"Luck" is probably random so over the long term the effect of "luck" would be fairly irrelevant to the outcome of your trading especially if you were trading a good system consistently.

But what exactly is luck anyway ? It's a bit like Love. Undefinable.

Hence nobody really knows what the expression " Lucky in love" means.

I digress.

 

[TWI]

If you have a 1000 acount luck is definitely a factor if you want to make a living out of it. If you start a fund you better hope the track record looks good in the beginning and that could include an element of luck too.
If you want to be consistently profitable over the long term however luck does not figure, just discipline. This is not to say that in some trades you can't get lucky, you do as in others you don't.

 

[BBB]

Labour
Under
Correct
Knowledge

 

[damianoakley]

Luck and chance play it's part in playing the markets, just like in any game.

But in the long-term it should have little effect on your overall account if you play the game correctly.

Let's say that we take the £1,000 from the original post and have the 10 losers in a row that you mention. Well, if you are managing your risk correctly, those 10 losers should not necessarily set you back to a level that would be difficult to come back from in a short space of time.

In fact, a market can go up or down. That means that when you get into the market, you technically only have a 50% chance of success. Therefore 10 losers in a row will actually be more common than you think. It happens to me at least once a week.

Looking at your £1,000 - let's say you decided to risk £100 on each trade. You enter the market 10 times and every trade loses. You've just been wiped out. Let's say however, that you decided to risk £20 on each trade. Your 10 losers have only set you back to £800 and you live to fight another day. So your run of bad luck was not actually that bad, because you controlled your risk appropriately.

 

[Dow Dog]

If you have a 1000 acount luck is definitely a factor if you want to make a living out of it.

If you want to make a living with a 1,000 account then you will need more than "luck". You will need Divine intervention.

 

[Nildes]

Who was the golfer who, when congratulated with the words "That was a lucky shot" replied: "Yes, and wasn't it lucky that I got up early every morning for years to practice too?"

I suspect you make your own "luck"

 

[TWI]

It was Samuel Goldwyn originally said
"The harder I work, the luckier I get."
Although Gary Player nicked it and often gets credited

 

[Trader333]

In my view luck only plays a part on an individual trade basis. Over time and a large number of trades, luck is almost totally irrelevant as statistical probabilities will nullify any effect that luck has on any trading approach.


Paul

 

[StockBaron]

Understanding Probability is a critical factor in successful (long-term) trading.

Those 'lucky' traders whose continued success depends more on luck than a solid grasp of probability (along with an equally solid grasp of risk & money management & trade selection & execution) will not be long-term successful traders.

If I could think of a sensible way to pose the question, I'd suggest a Poll along the lines of "How long have you been trading successfully?", but I suspect the masses who are/have not been long-term successful are not reading these boards anyway.

It's also quite possible of course, that many long-term successful (true traders) do not read them either.

Hence the pointlessness of thinking about polling t2w members.

 

[TWI]

Question is, how will this poll information help you make money?

 

[User]

I share a lot of the views expressed. If anyone gets 'lucky' to start of with, be strict to your money management and trading system then it will be compounding all the way.

The moral of this thread is, you may express your trading activity as 'luck' to start of with, if consistently successful then it will be a matter of 'skilful trading' with a bit of luck here n there. Make sure you compound your winning trades, as that will get you far.

Let me ask something else:

What makes a 'successful trader'? If you could define it in five individual words or phrases, thanks.

Self discipline (A successful system of trading defined by yourself, but also the discipline to abide by it)
Experience
Balls of steel
Courage
Cautious

 

[DaveGos]

Self Discipline, which at times requires Balls of Steel

 

[chump]

patience

more patience

even more patience

a lot more patience

and finally don't forget patience

 

[Nildes]

I think luck is often an unexpected perspective on a normal activity.
For instance, you buy on some good TA and get a boost from some positive newsflow or you sell for sound reasons just before the market drops because of something like the Madrid bombings.

Experience teaches that these events are always possible but doesn't give any way to predict them.
So you could call them luck.....good or bad...but still rely on the discipline of your TA and playing the averages to come out ahead.

 

[StockBaron]

Question is, how will this poll information help you make money?

Don't think it will TW, but it would be a bland old world if we only pursued that which might turn a buck.

 

[cassiopeia]

User

You may be interested in reading Nassim Taleb's 'Fooled by Randomness' . He suggests not only most 'successful' traders have achieved their profits more by luck than skill but this also applies to many many other professions, particularly in the world of business.

As suggested above there is a strong element of survivability in any sample, so it always appears more people are successful than actually are.

As also suggested, consistency would seem to be the key to distinguish between skill and luck. As with any statistical sample you have to take account of the variability before concluding anything. The problem is that the market moves in fits and starts, and the same is true of its overall characteristics. So one can achieve good consistency for 3 or 4 years only then to find your method no longer works, or the instruments you trade have been withdrawn or changed

There is also the problem of sudden shocks. For example, what if there was a really serious terrorist incident and the market was suspended and a consistent trader was caught on the wrong side of the market, it could wipe them out. How many styles here would be resilient to this? possibly only hedging strategies which involve buying options and those which keep approximately equal exposure of long and short positions. I would certainly be suspicious of traders who earn a lot of small profits yet risk large drawdowns, for example option writers.

 

[User]

Nice comments.

It was just something that I was thinking about. Interesting!

 

[chump]

Taken to the extreme there is only one point in time when you can determine with absolute certainty that you were successful and not merely lucky. However,you will be dead and as such I doubt if you will care....

 

[awoodj]

Lucky to start with

For a new trader i think this might be the worst thing that could happen to them (unless they take the "lucky" profits and run)

They will put it down to how clever they are rather than luck. They will then over the course of time loose all they won through their luck and probably a lot more.

Nobody is that clever that when they come into this game, they can win from the start and keep going.

PS In my first few months trading a good few years ago i made over 25%. Unfortunatley that made me think i was just that clever or the game was that easy. Then i lost it all and some besides, that is when i started learning. Thankfully i now know this is not an easy game and it takes quite a few things to take consistent profits.

Not being disciplined is the problem, a few times in those early months i had some big loosers that came back into profit. Then you think you will always get away with it and a couple of trades come along and kill you. These days i don't have big loosers i just stop out the trade and try another trade later.