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Short thread on luck in trading:
People fail to understand the role of luck in trading. Sometimes its a coin-toss type of luck, but there is also another type of luck far more dangerous. Its the kind of luck where extreme events come across sporadically.
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People fail to understand the role of luck in trading. Sometimes its a coin-toss type of luck, but there is also another type of luck far more dangerous. Its the kind of luck where extreme events come across sporadically.
1/7
This lucks fools us into thinking the system/method we use works.
You may stumble across a system which wins with a high degree of regularity. Say 999 times out of a 1000. However, when the 1 in a thousand comes along it can eviscerate the results of the other 999 times. 2/7
You may stumble across a system which wins with a high degree of regularity. Say 999 times out of a 1000. However, when the 1 in a thousand comes along it can eviscerate the results of the other 999 times. 2/7
Sometime you can be lucky and have that experience at the start of your career. My first week of Trading was mid Oct 87, or they can come along years into your career when you think the system/method you have is invincible, as the Geniuses of LTCM found out in 1998. 3/7
There is a saying in trading, “Eat Like a Pigeon, Shit Like an Elephant”. If you use an approach which that method is an apt description of, then you are always leaving yourself wide open to that kind of sporadic event luck, which can wipe you out. 4/7
Most new traders leave themselves exposed to that sort of bad luck. They haven't discovered the importance yet of Risk Management, they also haven't discovered its your set-ups risk/reward that matters, not whether you are right or wrong on the market. 5/7
Time is the great teacher in trading. And many of the lessons needed to succeed in trading are counterintuitive to what my work in other parts of your life. That is why trading can take so many years to succeed at. Its a constant learning curve. 6/7
If you've been doing it 2-4 years, get some perspective, you're most likely still very close to the start of it. Don't beat yourselves up, its a marathon not a sprint and you're barely a few miles into it. Keep learning, keep progressing. 7/7
