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Admit it - your profits are based on luck

  • #441
  • Edited 2:13am Oct 1, 2008 1:54am | Edited 2:13am
Ok I'll try to give mine answer!

Let's compare trading to car driving, they are pretty similar you can control your car (your trade) but you can not control other cars (market), let's say that your worst scenario is death in a car accident (blowing your account) and your goal is to get home safe (get your 1% every day).
You have many different possibilities:

You can study the probabilities to have a mortal car accident, or to have a normal accident with just some scratches (study the market), you'll see that most of the mortal accident happens on the highways where everybody goes faster (lower timeframes), or you can drive in your town, avoiding freeways and highways, (daily weekly) you still have probabilities to have a crash, but not so dangerous.
With higways (lower frames) you get home faster (you reach your goal faster) but you have more probabilities to have a severe crash.
Now you can decide do you trade on higher or lower time frames?
If you just got your driving license you should avoid higways (are you a newbie? stay away from lower time frame).
If you are a newbie and you drive at 300mph and you crash, you can't say i'm unlucky.

So you start to drive in your town, you still have some accident but you were going slow, so you had time to see what your mistake was, maybe you were driving a longer car then the one you had before, if while parking you scratch your car, you don't say you have been unlucky, but you memorize that experience so next time you'll pay more attention. If you go 300mph too many things can happen all in a second you can't say you have been unlucky.

Another scenario could be that someone bump into your car (can't control market), but you have planned well your trip and you weren't on a higway so the damage is not so bad, you haven't been lucky, you know that in a city street people don't go too fast.

I think you look at trading from a wrong point of view (just as most of the people), you look to the earnings, while professional look at their losses, if you control your losses you'll never feel lucky/unlucky. And don't get offended maybe you are a great trader, i'm not saing you are a bad trader!!!

If you buy a Hummer and you use it just in your town and you just go at 20mph what is your possibilities to have a mortal crash? yes, you still have some, but i think most of the people would drive safely at home everyday, so some unlucky guy exist but that's the exception not the rule....
See? I have controlled my losses, obviously if a meteroite crashes on my Hammer....

In conclusion:
Trading is a paradox so I agree with you that having profits has something to do with luck, but I disagree when you say it's just luck.
If you study your market (higway), if you contrl your trade and don't place a 10% risk trade, but you place just a 0.5% risk trade (buy a safe car with 30 airbags made of titan), and you don't get into a trade just one minute before an important news (you go slow, and you don't drive while the weather channel said a hurricane is coming), you'll have a big probability to drive home safe.
Now take your conclusion....


PS
Just saw some one else made my car example!!
Sorry for my english
  • #442
  • Oct 1, 2008 4:22am Oct 1, 2008 4:22am
Sorry if I'm still boring you! but i was thinking on what i said above, maybe i've been a little too long and a little OT!!! but i'll don't delete that post, i wanna add something more.

I think I've used wrong words....
If we talk about an outcome of a single trade I don't call it luck or unluck, but i call it RANDOM outcome
If we talk about at least 1 year of trades the outcome is not luck nor random it is what we have planned our trades for, if we managed our positions good, we are in profit and it's not luck, if we are in negative there is something wrong.
  • #443
  • Oct 1, 2008 4:31am Oct 1, 2008 4:31am
Quoting KudzuFX
there is a difference between luck and randomness.

yes there is randomness in every trade, but if you have prepared and have access to all necessary information you can make a trade and succeed without the credit going to luck. If the trade fails the credit for that failure does not go to bad luck or bad chance. The credit goes to lack of sufficient information, preparation and skill.

In the common language we use the term 'luck' to explain what we do not know or have not taken the time to figure out.
I dont think I'll ever get tired of this.

Anyway luck is not used to explain, "What we don't know or have not taken the time to figure out."

The term luck is used when refering to the inherent randomness in a complex system, where the outcome of an event has some bearing on our wellbeing (financial or otherwise).In systems we dont care much about, say the flow of a river, we call it randomness. When the events affect our bank balance we blame lady luck.

Quantum mechanics is a widely studied field which commands billions of invesment dollars. There is a deep understanding of the field borne of countless hours of research and development. And yet sub atomic particles still display random behaviour despite our increasing understanding of them. That is because unpredictability is hard coded into the fabric of nature. Not because of something those pesky scientists, "have not taken the time to figure out".
  • #444
  • Oct 1, 2008 4:40am Oct 1, 2008 4:40am
I think it's just how we look at things! i think we are saying the same thing, but we call it with other words! (don't know which is the right one!!)
  • #445
  • Oct 1, 2008 5:03am Oct 1, 2008 5:03am
I like the car analogy. It makes perfect sense.

Let me give you a trading example:

Yesterday I was trying to short the Euro. After the break of support I placed a sell stop under a 15m pullback candle. By mistake I placed an order 10X greater than usual. Fortunately the trade exploded in my favour. So I was rewarded 10X for making a bad mistake. This is what we call GOOD LUCK. That does not mean that there was some benevolent force working alongside me.

The word luck is obviously too emotive for some. Nobody seriously believes in an external force for good or bad at work, it's just a colloquial way of describing an unforseen outcome.
  • #446
  • Oct 1, 2008 6:07am Oct 1, 2008 6:07am
Quoting Ted1983

The word luck is obviously too emotive for some. Nobody seriously believes in an external force for good or bad at work, it's just a colloquial way of describing an unforseen outcome.
Huh......


Quoting Ted1983
I would say luck is a non existant supernatural force
If you're saying luck is "a colloquial way of describing an unforseen outcome" then I agree (although that's not the traditional meaning of the word), but if you're saying "luck is a non existant supernatural force" then I disagree, and so do you.....sometimes!

  • #447
  • Oct 1, 2008 6:16am Oct 1, 2008 6:16am
You're not very bright are you?
  • #448
  • Oct 1, 2008 6:19am Oct 1, 2008 6:19am
Quoting Ted1983
You're not very bright are you?
That was a bit uncalled for. If you're unwilling (or unable?) to reply to the reasonable observations I made in this post then it might have been better for you to say nothing.

Perhaps you're right, maybe I'm not very bright, but at least unlike you I'm consistent in my not-very-bright opinions!
  • #449
  • Oct 1, 2008 6:34am Oct 1, 2008 6:34am
OK . Basically you're pointing out an inconsistency in my argument that doesn't exist. Which is very annoying (but you already knew that).

Nevertheless let me clarify:

"luck is a non existant supernatural force"-me 2008

Here I am refering to the tendancy of people to attribute a certain outcome to some mysterious force. People such a tarrot card readers, astrologists etc all get off on this sort of crap.

"a colloquial way of describing an unforseen outcome"-me 2008 (kind of)

This is a blatant case of quote mining, although I feel honoured that you feel the need to subvert my position. The full quote should be;

"Nobody seriously believes in an external force for good or bad at work, it's just a colloquial way of describing an unforseen outcome".

Thus the inconsistency in my argument dissolves into the ether.

Q.E.F
  • #450
  • Edited 7:05am Oct 1, 2008 6:55am | Edited 7:05am
Quoting Ted1983
I dont think I'll ever get tired of this.

Anyway luck is not used to explain, "What we don't know or have not taken the time to figure out."

The term luck is used when refering to the inherent randomness in a complex system, where the outcome of an event has some bearing on our wellbeing (financial or otherwise).In systems we dont care much about, say the flow of a river, we call it randomness. When the events affect our bank balance we blame lady luck.

Quantum mechanics is a widely studied field which commands billions of invesment dollars. There is a deep understanding of the field borne of countless hours of research and development. And yet sub atomic particles still display random behaviour despite our increasing understanding of them. That is because unpredictability is hard coded into the fabric of nature. Not because of something those pesky scientists, "have not taken the time to figure out".
luck is not the same thing as...

unpredictability
randomness
flow

If the river you speak of started overflowing its banks, some people will say, "I live next to the river and my house is flooded. What bad luck." Others will say that the river overflowing its banks (even though it only happens once ever 100 years or so) is a natural effect from a set of conditions such as weather, time of year, current level before the storm, etc.

The unhappy occurrence of the river overflowing is explainable not in terms of luck, but a natural cause. Was it random? Yes. Was it unpredictable as to exactly when it would occur? Yes. Did it overflow more in some places than others? Yes. Was it caused by 'luck' or 'bad luck.' No. There is a specific cause for every effect even though we may not have all the knowledge to explain each one. You taken on a certain kind of risk by living on the edge of this river that can be explained.

This is true in Forex. Does the chart go this way or that way because Mr. Luck and Mr. Price are working together to keep everybody guessing? No. Price goes wherever it goes because a majority of trades have outweighed those on the other side. Is this activity random? Yes, but this activity is not caused by the randomness.

Luck is just a folksie expression we use to explain what we cannot fully explain.

Quantum mechanics does not study luck. It studies real physical particles with real physical causes and effects and with real behvioral characteristics. Is there a certain kind of randomness in their behavior? Yes, but that random behavior can be explained within a range of possibilities. For example, atomic particles do not change their charge from positive to negative without a determinable cause.

In Forex, price moves in range of possiblities. I can be 99.999999% certain that the price of the G/U will not drop to 000.00 at close of business tomorrow. BUT if this did happen it would not be explanable by 'luck.' There would have to be a specific reason or set of reasons why priced dropped to zero when it did.

If by some quirk you and I were an all knowing genuis who could look at a chart and know all the reasons why price is moving this way or that then trading for us would be as easy as breathing. But again the trader does not have every piece of current data at the edge of his consciousness, so he has to make studied guesses and quantifiable presumptions. If price goes against him he was not 'unlucky'. He made a bad choice based on limited information. That's was trading is.
  • #451
  • Oct 1, 2008 7:02am Oct 1, 2008 7:02am
Quoting Ted1983
OK . Basically you're pointing out an inconsistency in my argument that doesn't exist. Which is very annoying (but you already knew that).

Nevertheless let me clarify:

"luck is a non existant supernatural force"-me 2008

Here I am refering to the tendancy of people to attribute a certain outcome to some mysterious force. People such a tarrot card readers, astrologists etc all get off on this sort of crap.

"a colloquial way of describing an unforseen outcome"-me 2008 (kind of)

This is a blatant case of quote mining, although I feel honoured that you feel the need to subvert my position. The full quote should be;

"Nobody seriously believes in an external force for good or bad at work, it's just a colloquial way of describing an unforseen outcome".

Thus the inconsistency in my argument dissolves into the ether.

Q.E.F
Pointless argument but anyway....


I asked "So your definition of 'luck' is random chance?"

You replied "Kind of. I would say luck is a non existant supernatural force, invoked by those who do not intuitively grasp the random nature of existence."

...and then "Nobody seriously believes in an external force for good or bad at work, it's just a colloquial way of describing an unforseen outcome."


I would call that not just an inconsistency but a total contradiction. You obviously wouldn't. I guess we'll just have to agree to disagree.

I trust you're more consistent and a little less argumentative in your trading, or maybe those are skills you need to develop?

I'll let you have the last word on that subject
  • #452
  • Oct 1, 2008 7:11am Oct 1, 2008 7:11am
Quoting KudzuFX

......the trader does not have every piece of current data at the edge of his consciousness, so he has to make studied guesses and quantifiable presumptions. If price goes against him he was not 'unlucky'. He made a bad choice based on limited information. That's what trading is.
In one lucid paragraph what I've been trying to convey in a dozen slightly muddled posts!

  • #453
  • Oct 1, 2008 7:32am Oct 1, 2008 7:32am
Quoting lostinspace
Pointless argument but anyway....


I asked "So your definition of 'luck' is random chance?"

You replied "Kind of. I would say luck is a non existant supernatural force, invoked by those who do not intuitively grasp the random nature of existence."

...and then "Nobody seriously believes in an external force for good or bad at work, it's just a colloquial way of describing an unforseen outcome."


I would call that not just an inconsistency but a total contradiction. You obviously wouldn't. I guess we'll just have to agree to disagree.

I trust you're more consistent and a little less argumentative in your trading, or maybe those are skills you need to develop?

I'll let you have the last word on that subject
In the name of civility please point out where this "total contradiction" is. As I have just done a blind test on the quotes with an unbiased third party and they saw no contradiction.
  • #454
  • Oct 1, 2008 7:49am Oct 1, 2008 7:49am
Quoting Ted1983
In the name of civility please point out where this "total contradiction" is. As I have just done a blind test on the quotes with an unbiased third party and they saw no contradiction.
I would give up. These guys are speaking another language.

Everybody knows that:
good luck = favourable outcome of a random event
bad luck = unfavourable outcome of a random event

You win in forex by increasing your exposure to the former while limiting your exposure to the latter.
  • #455
  • Oct 1, 2008 8:10am Oct 1, 2008 8:10am
Quoting KudzuFX
luck is not the same thing as...

unpredictability
randomness
flow

If the river you speak of started overflowing its banks, some people will say, "I live next to the river and my house is flooded. What bad luck." Others will say that the river overflowing its banks (even though it only happens once ever 100 years or so) is a natural effect from a set of conditions such as weather, time of year, current level before the storm, etc.

The unhappy occurrence of the river overflowing is explainable not in terms of luck, but a natural cause. Was it random? Yes. Was it unpredictable as to exactly when it would occur? Yes. Did it overflow more in some places than others? Yes. Was it caused by 'luck' or 'bad luck.' No. There is a specific cause for every effect even though we may not have all the knowledge to explain each one. You taken on a certain kind of risk by living on the edge of this river that can be explained.

This is true in Forex. Does the chart go this way or that way because Mr. Luck and Mr. Price are working together to keep everybody guessing? No. Price goes wherever it goes because a majority of trades have outweighed those on the other side. Is this activity random? Yes, but this activity is not caused by the randomness.

Luck is just a folksie expression we use to explain what we cannot fully explain.

Quantum mechanics does not study luck. It studies real physical particles with real physical causes and effects and with real behvioral characteristics. Is there a certain kind of randomness in their behavior? Yes, but that random behavior can be explained within a range of possibilities. For example, atomic particles do not change their charge from positive to negative without a determinable cause.

In Forex, price moves in range of possiblities. I can be 99.999999% certain that the price of the G/U will not drop to 000.00 at close of business tomorrow. BUT if this did happen it would not be explanable by 'luck.' There would have to be a specific reason or set of reasons why priced dropped to zero when it did.

If by some quirk you and I were an all knowing genuis who could look at a chart and know all the reasons why price is moving this way or that then trading for us would be as easy as breathing. But again the trader does not have every piece of current data at the edge of his consciousness, so he has to make studied guesses and quantifiable presumptions. If price goes against him he was not 'unlucky'. He made a bad choice based on limited information. That's was trading is.
In the immortal words of Roy Walker, "It's good, but its not right".

Let me go back to my favourite poker comparison. In Holdem we may push a perceived equity edge on the flop by betting or raising given an appropriate range of hands that our opponent/s could hold. The turn card can either augment or erode our equity in the hand, however we do not know what it will be. Likewise even if we knew everything possible about the market at point x (or in holdem if we could see our opponents cards) the incoming influences are still random.

We can attribute a probabilty distribution to the outcome of a poker hand, because the deck is always the same . However in trading there is a constant shifting market state that you can't quantify even if you had perfect information at the time.Therefore the probability of the outcome of a single trade is not knowable!

This does not mean that trading profits all come from "luck" or random chance. Of course you can make "studied guesses" but the probability of a favourable outcome is not quantifiable. If it was the market would cease to exist!
  • #456
  • Oct 1, 2008 8:37am Oct 1, 2008 8:37am
Quoting euclid
I would give up. These guys are speaking another language.

Everybody knows that:
good luck = favourable outcome of a random event
bad luck = unfavourable outcome of a random event

You win in forex by increasing your exposure to the former while limiting your exposure to the latter.
Well put. And by luck or by design I'm up over 300 pips this week so far. Long may it continue.
  • #457
  • Oct 1, 2008 9:05am Oct 1, 2008 9:05am
Quoting Ted1983
Well put. And by luck or by design I'm up over 300 pips this week so far. Long may it continue.
300, that's good. It doesn't actually mean anything but it sure sounds impressive!

I'm up 4% since Friday, oh sorry you want it in pips, over 600.

Maybe we should substantiate our claims and post trading blotters.....or maybe not, eh
  • #458
  • Oct 1, 2008 9:07am Oct 1, 2008 9:07am
Quoting euclid
These guys are speaking another language.
Evidently
  • #459
  • Oct 1, 2008 9:22am Oct 1, 2008 9:22am
Tut tut,

First time i have been on this part of FF, very interesting. I think the original quote was "admit it - your profits are based on luck". Its funny because when I started trading my father said I was gambling. I said to him, trading is a bit like crossing the road. You can rush up to the road and bolt accross without a single glance to either side. That is a 50/50 chance you will get hit. Or you can learn some basic rules, walk up to the road, look both ways and then methodically and purposefully cross the road. You have just put the odds in your favour. You can still get hit by not seeing something or not following the rules precisely, but you have a better than 50/50 of getting across safely. Trading is the same, you can go blindly long or short with a 50/50 chance. Or you can learn some basic rules and a bit of technique, apply them methodically and purposefully and put the odds in your favour. You can still lose by not seeing everything on the chart or by not following precisely your own rules. But if you abide by the rules you increase your chances of success.
I don't call it luck, I call an educated, calculated risk, so does my father now.

Regards,

Anthony
  • #460
  • Oct 1, 2008 10:33am Oct 1, 2008 10:33am
Quoting lostinspace
300, that's good. It doesn't actually mean anything but it sure sounds impressive!

I'm up 4% since Friday, oh sorry you want it in pips, over 600.

Maybe we should substantiate our claims and post trading blotters.....or maybe not, eh

Well really any direct comparison should be made in pips. Because I could open an account, leverage it to the hilt and go, "Ooooh look at me I doubled my account in a day! whoohooo its the Holy grail."

That said, congratulations on your recent results you're obviusly twice the trader I am.

However that does not mean you get carte blanche on talking crap about the nature of chance and randomness. If what you believe about the markets was true then they could not exist! Just apply your obviously massive intellect to it and you'll realize why.
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