The idea that “it’s not the system, it’s the trader” has become common knowledge to this point. It has been repeated over and over. The market wizards books harp on about this and the traders in there explain why.
However, I agree that simply because it’s repeated all the time that doesn’t mean we should blindly accept it. I will provide an example from poker. I find that poker is a great tool for conceptualizing a lot of trading concepts.
I play poker in the casino from time to time. I noticed that at our casino there are generally some good players and a lot of weak players. Upon closer inspection I noticed that it’s a far smaller subset that is really good. I picked up that if I simply waited for strong hands and played an ALLIN or FOLD strategy, I would come out on top.
The reason is that multiple players call the first raise. This means if you go all in with good hands and everyone folds, you pick up a nice pot. Keep this up for a few hours and you’ll have a few hundred dollars (I translate to first world currency to make it easier to understand, we’re playing in ZAR)
So here I have a pretty simple formula for winning, it doesn’t always work because even with aces you lose from time to time. But if you repeat it then you win.
I play in a casual game with a bunch of fellows. I invited one of them to come play and follow this strategy.
He assures me that he can play tight and wait and do the all in or fold strategy.
He doesn’t, he bleeds money all night long calling too much.
He couldn’t follow the strategy.
It’s far easier to explain this edge in poker than it would be in trading.
He understood the edge. I tested the edge to great success. He lost money.
People can’t follow a system they don’t believe in. Believing in a system requires testing it.
If you throw a system my way and I test it and I believe in it, I can execute it.
Most people can’t execute the system correctly. They do things that the edge will not survive.
Revenge trade for example.