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Need luck or skill for trading?

  • #101
  • Jul 15, 2013 11:42pm Jul 15, 2013 11:42pm
All things being equal, luck alone will get you nowhere 99% of the time. This applies not only to trading, but to anything one might try to achieve in life. That said, successful trading is 99% preparation (Call it skill/hard work whatever you want. The fact remains it depends on the individual).

Read this (basic social psychology): http://en.wikipedia.org/wiki/Locus_of_control

People who predominantly attributed success or failure at a given task to internal factors like ability, years later were found to be objectively more successful (had higher income, for instance), than those who attributed success or failure mostly to external factors like luck. From personal experience applying Rotter's scale, I'd say it is also a fairly good proxy for general intelligence: more intelligent individuals tend to score higher in internal locus of control...
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #102
  • Jul 16, 2013 3:04am Jul 16, 2013 3:04am
If you are operating in business like trading your income will depends on luck if you like it or not (I consider luck to be sufficient condition for success and not necessary). You can be the most skilled trader and with bad luck you will end up as LTCM, or would you say these guys were not skilled enought? Of course if you approach successfull trader and ask him what is the reason he has succeeded he will claim there was no luck involved just hours of hard work and sleepless nights, nobody will say, oh I was just lucky. Problem with this bias is that your forget to count all hard working traders that were not able to make it in trading, you just pick up those at the top with the best results that claim they they are skilled. But how do you determine they are not just lucky? By track record? If you have 15years bull market your skilled trader would be anybody with buy and hold strategy. If you have 100K unskilled traders there is good chance that a lot of them will have great track record after 10-15years just by luck. In fact I would be supprised if no trader from this sample would stick out. You should read some works on probabilities maybe Id start with Fooled by randomness.
As pemully said if you want to make money its better to be lucky then skilled, because with all the skill you can still end up as loser, if you are lucky you can retire after 5 years.
  • #103
  • Jul 16, 2013 3:22am Jul 16, 2013 3:22am
Quoting alter
You can be the most skilled trader and with bad luck you will end up as LTCM
Luck has nothing to do with a loss or a profit in trading. This is the market which will give you the loss or profit. If you are not able to master the market to take a profit, this is your fault not the bad luck fault.
MT4/MT5 EAs/Indicators/Alerts coder
  • #104
  • Jul 16, 2013 3:23am Jul 16, 2013 3:23am
http://paulbourke.net/fractals/fracintro/
tradewith60
  • #105
  • Jul 16, 2013 3:26am Jul 16, 2013 3:26am
what is occurring is simple to read if you know how to look at it

Attached Image
tradewith60
  • #106
  • Jul 16, 2013 3:29am Jul 16, 2013 3:29am
Speaking as an experienced Day Trader myself, the most important factor of course is Skill.

*Just Remember:
Skill, Skill, Skill.. !
  • #107
  • Jul 16, 2013 3:29am Jul 16, 2013 3:29am
"Philosophy is written in this grand book - I mean universe - which stands continuously open to our gaze, but which cannot be understood unless one first learns to comprehend the language in which it is written. It is written in the language of mathematics, and its characters are triangles, circles and other geometric figures, without which it is humanly impossible to understand a single word of it; without these, one is wandering about in a dark labyrinth." - Galileo (1623)
tradewith60
  • #108
  • Jul 16, 2013 3:56am Jul 16, 2013 3:56am
Quoting alter
If you are operating in business like trading your income will depends on luck if you like it or not (I consider luck to be sufficient condition for success and not necessary). You can be the most skilled trader and with bad luck you will end up as LTCM, or would you say these guys were not skilled enought? Of course if you approach successfull trader and ask him what is the reason he has succeeded he will claim there was no luck involved just hours of hard work and sleepless nights, nobody will say, oh I was just lucky. Problem with this bias is...
Can you define what events in trading you could class as lucky and unlucky? are we saying lucky would be pressing buy when you intended to press sell?

Can you give an example of how it is likely that any of these events would occur often enough of a period of years to make someone profitable as a trader? In my eyes the only possible way would be if you took your first trade and held it for 5 years and you just so happened to take a buy/sell right at the swing point in a very long trend.... that would be lucky, but are you gonna base your future income on that slim possibility?
tradewith60
  • #109
  • Jul 16, 2013 4:35am Jul 16, 2013 4:35am
Luck plays a big role in trading, who can deny that?

Example, yesterday I set myself up in an AUD/USD short in the morning after less than impressive China data, then by the time USD retail sales came out (where I was expecting a positive result), the data came out negative and I had to quickly close my trade which had been up 40 pips on one position and 20 pips on the second position at the most, for a 2 pip loss. No big deal..

If the USD news came out positive then I would have doubled my total size and rode it short for about 50 - 100 pips for a total gain of nearly 50% of my account. Luck was definitely at play there, it just didn't go may way but I managed it and moved on.

The skill was in being able to anticipate the entire thing before it happened and knowing when my good luck would turn to bad luck, or my good luck would turn into better luck.

Create your own luck

and what about the people caught long on 9/11... Unlucky...

On a side note: second to the above my broker platform decided to crash on me RIGHT as the USD news came out... That was rather unlucky as well! Luckily I was able to login on my phone and close out in time.
Time hides Nothing
  • #110
  • Jul 16, 2013 4:46am Jul 16, 2013 4:46am
Quoting CindyXXXX
Luck plays a big role in trading, who can deny that? Example, yesterday I set myself up in an AUD/USD short in the morning after less than impressive China data, then by the time USD retail sales came out (where I was expecting a positive result), the data came out negative and I had to quickly close my trade which had been up 40 pips on one position and 20 pips on the second position at the most, for a 2 pip loss. No big deal.. If the USD news came out positive then I would have doubled my total size and rode it short for about 50 - 100 pips for...
It wasn't luck Cindy it was lack of skill... AU is clearly long on daily and weekly TF, sorry
tradewith60
  • #111
  • Jul 16, 2013 4:48am Jul 16, 2013 4:48am
Quoting 60minuteman
{quote} It wasn't luck Cindy it was lack of skill... AU is clearly long on daily and weekly TF, sorry
oh.. that's ok.. I mean clearly it is now...! rofl.. So your weekly time frame could predict USD data and a more dovish RBA..

You have more skill than me sir

I'm gonna chance a sell here.. G/L to me
Time hides Nothing
  • #112
  • Jul 16, 2013 4:51am Jul 16, 2013 4:51am
Quoting 60minuteman
{quote} Can you define what events in trading you could class as lucky and unlucky? are we saying lucky would be pressing buy when you intended to press sell? Can you give an example of how it is likely that any of these events would occur often enough of a period of years to make someone profitable as a trader? In my eyes the only possible way would be if you took your first trade and held it for 5 years and you just so happened to take a buy/sell right at the swing point in a very long trend.... that would be lucky, but are you gonna base your...
Simply If you have 100K traders to bet 1000EUR(u win 1000EUR or u lose 1000EUR) on each toss you can expect to have 50K traders turning profits at the end of the year. It will be 25K at the end of second year and so on and still about 100traders turning profits each year for 10 years just by luck. But for you these traders would be skilled and hard working right? Therefore it is very difficult to say on the base of past records if trader is lucky or skilled, indeed, would you say in LTCM were unskilled or unlucky managers?
  • #113
  • Jul 16, 2013 4:56am Jul 16, 2013 4:56am
Quoting CindyXXXX
{quote} oh.. that's ok.. I mean clearly it is now...! rofl.. So your weekly time frame could predict USD data.. You have more skill than me sir I'm gonna chance a sell here.. G/L to me
data doesn't move price traders do... They had already decided last week that they still wanted more longsies

Interesting fact 50% of the time price moves in the opposite direction of the last bar, the other 50% price moves in the same direction. 50% of them move again in the same direction, then 50% of them move again in that direction...

Attached Image (click to enlarge)
Click to Enlarge Name: Screen shot 2013-07-16 at 10.53.24.png Size: 24 KB
tradewith60
  • #114
  • Jul 16, 2013 5:00am Jul 16, 2013 5:00am
Quoting 60minuteman
{quote} data doesn't move price traders do... They had already decided last week that they still wanted more longsies Interesting fact 50% of the time price moves in the opposite direction of the last bar, the other 50% price moves in the same direction. 50% of them move again in the same direction, then 50% of them move again in that direction... {image}
Yeah I know how you trade, the Daily looks even better right? The spike low, then the close above 7/03 support?
Haven't been technical trading at all lately...

So you went long you mean? Good catch! As for what moves the market... I agree.. Traders do!

Still going short here... Stop at .9270, sell more at 250,,, Targeting sub .90 And that was before it happened
Time hides Nothing
  • #115
  • Jul 16, 2013 5:12am Jul 16, 2013 5:12am
Quoting alter
{quote} Simply If you have 100K traders to bet 1000EUR(u win 1000EUR or u lose 1000EUR) on each toss you can expect to have 50K traders turning profits at the end of the year. It will be 25K at the end of second year and so on and still about 100traders turning profits each year for 10 years just by luck. But for you these traders would be skilled and hard working right? Therefore it is very difficult to say on the base of past records if trader is lucky or skilled, indeed, would you say in LTCM were unskilled or unlucky managers?

The coin toss traders were not unlucky, they were just stupid for risking money on 50% win rate 1R trading, and the coin toss traders that won were also stupid for the same reason.

A skilled trader will be consistent, a skilled trader has repeatable profits and can explain his method, why it works and why it is adaptable to changes in market conditions.

There is a distinct difference to saying that clearly some people have been lucky and saying that luck plays a part in being a successful trader, there will be an exception to any rule as markets are basically chaos with repeating patterns, but in general if you think you need luck to be a trader you're just not a very good trader.

Saying you were unlucky because of a news release is bull... news affects market conditions, news is a part of trading and so is losing. If you lost because news came out with unexpected figures that's not bad luck, its a part of trading, your strategy should be able to stand unexpected losses.
tradewith60
  • #116
  • Jul 16, 2013 5:14am Jul 16, 2013 5:14am
Quoting CindyXXXX
{quote} Yeah I know how you trade, the Daily looks even better right? The spike low, then the close above 7/03 support? Haven't been technical trading at all lately... So you went long you mean? Good catch! As for what moves the market... I agree.. Traders do! Still going short here... Stop at .9270, sell more at 250,,, Targeting sub .90 And that was before it happened
well I wish you luck Cindy... im not trading AU, i'm long gold though
tradewith60
  • #117
  • Jul 16, 2013 5:31am Jul 16, 2013 5:31am
Quoting alter
If you are operating in business like trading your income will depends on luck if you like it or not (I consider luck to be sufficient condition for success and not necessary). You can be the most skilled trader and with bad luck you will end up as LTCM, or would you say these guys were not skilled enought? Of course if you approach successfull trader and ask him what is the reason he has succeeded he will claim there was no luck involved just hours of hard work and sleepless nights, nobody will say, oh I was just lucky. Problem with this bias is...
Good post. I like it and accept most of it. It's virtually impossible to distinguish the amount of skill, effort, luck, whatever, in most traders results.

However, I disagree with the way you see luck/chance role. Luck alone will never guarantee long term success the way I see it (hence the expression "beginner's luck" but no expression "veteran's luck"). All things being equal, long term, skill+effort will mitigate/negate luck effect. Long term, skill+effort will account for most of the results, whereas luck impact should be only marginal. Luck/chance effect is at it's maximum potential in an uncontrolled/uncertain environment. Skill/effort, on the other hand, can be used to directly gain control/reduce uncertainty in the environment. Hence, the more skill/effort you apply, the less room there is for chance/luck to account for your final results.
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #118
  • Jul 16, 2013 5:32am Jul 16, 2013 5:32am
Quoting 60minuteman
{quote} The coin toss traders were not unlucky, they were just stupid for risking money on 50% win rate 1R trading, and the coin toss traders that won were also stupid for the same reason. A skilled trader will be consistent, a skilled trader has repeatable profits and can explain his method, why it works and why it is adaptable to changes in market conditions. There is a distinct difference to saying that clearly some people have been lucky and saying that luck plays a part in being a successful trader, there will be an exception to any rule as...
They can be stupid Im not talking about inteligence here (however if you are inteligent or not its pure luck unless u are genetically modified). All of these survived (100)traders will explain you their method with all the details you need wouldt you belive somebody with 10years great record or would you say they were lucky? You cant say for sure can you? So for you there were unskilled traders in LTCM, but they were working very hard , they had proper education the best machines etc... so how come they ended up like that?
I dont have problem to say I need luck to make profits in the market I can take small loses here and there and if some lucky (on unlucky ) event happen I just need to make sure Im in to capitalize on it.
  • #119
  • Jul 16, 2013 6:05am Jul 16, 2013 6:05am
Quoting alter
{quote} They can be stupid Im not talking about inteligence here (however if you are inteligent or not its pure luck unless u are genetically modified). All of these survived (100)traders will explain you their method with all the details you need wouldt you belive somebody with 10years great record or would you say they were lucky? You cant say for sure can you? So for you there were unskilled traders in LTCM, but they were working very hard , they had proper education the best machines etc... so how come they ended up like that? I dont have problem...
I suppose that's fair... in general I decide where price is going, trade to that point and exit.

If you truly understand markets and how they work then luck wouldn't be a consideration.

But if you feel you need luck then I guess there's no problem with that. Good luck.
tradewith60
  • #120
  • Jul 16, 2013 6:12am Jul 16, 2013 6:12am
Quoting 60minuteman
{quote} I suppose that's fair... in general I decide where price is going, trade to that point and exit. If you truly understand markets and how they work then luck wouldn't be a consideration. But if you feel you need luck then I guess there's no problem with that. Good luck.
Enlighten us!! from what I gather here, 60minuteman decides where the price is going! No luck needed. Never have a loss, because unluckiness does not exist.. Holy grail and 100% wins..
Time hides Nothing
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