Hot Take: Trading is partly SKILL and partly LUCK. So when “perfect” and “ideal” setups and signals don’t work, don’t beat yourself up.
“The truth is that markets are complex and chaotic systems and their behavior has both systemic and random components…” - Derived from Chaos Theory by Edward Lorenz
The sooner you accept the fact that no matter how much effort, skill, and study you give, you’ll never get it right 100%, the sooner you can become profitable.
What do you think? Share your thoughts, I’d love to hear them.
Traders spend far too much time and energy looking back at their losing trades, and almost none on their winning trades. They always assume they made a mistake somewhere in the process - but sometimes the market just takes the less probable route.
True. I guess it’s hard to work against “Negative bias” which is actually our “survival instincts”. We tend to focus more on the bad experiences - nature’s way of keeping us on our toes to survive!
The way people are educated in schools also does not help when it comes to something like trading. School gives us the attitude that if a certain action ended negatively, then either we did not know enough when we started it, or we made a mistake when we were doing it, and therefore we need to spend time on this specific issue in order to improve.
Naturally, teachers don’t spend their time improving our correct answers in a test or exam. it’s a good start for being an accountant, it’s a terrible start for being a trader.
I completely agree with your perspective. Trading indeed involves a combination of skill and luck. While having a solid strategy and understanding the market is crucial, there will always be elements of unpredictability and randomness that we cannot control.
Accepting this reality can help us manage our expectations and reduce the frustration that comes with unexpected outcomes. It’s important to stay disciplined, continually learn, and adapt to market changes, but also to be kind to ourselves when things don’t go as planned.
Trading is a journey, and every experience, whether positive or negative, contributes to our growth as traders. What are some strategies you use to manage the balance between skill and luck in your trading?
True! This is actually one of the things i had struggled with before. It’s why I’m trying to get it on the conversation - for the new and little guys to see that what they’re goin’ thru is normal and can be overcome.
I love this especially the part where we try to be kind to ourselves.
Pray to lady luck. Ahihihi… jk.
I present to you, dear readers, two strategies:
Try to have a positive expectancy in your trading: Winning more when you win, and losing less when you lose. Choose to take trades where the RRR is skewed in favor of the rewards! Mainly coz cats like me love rewards.
You can increase your win rate by having more stringent criteria in the setups that you take. My trading system has a “perfect” or “ideal” setup. I give that a perfect score. I have as well a “passing score” that when a given setup may not be exactly as the “ideal” one but is close enough, I am allowed to take it.
This is where we can be more stringent. We can raise the “passing score” closer to the “perfect score” ergo: the setups we take are either perfect or so close to perfect in the point of view of the trading system. Of course, this implies that the system actually has an edge (which requires testing).
Absolutely, trading involves a mix of skill and luck. While skill helps navigate the markets, luck can play a role in unexpected events. Accepting this reality helps manage expectations and reduces self-blame when trades don’t go as planned.
