Does trading require talent?

[dbphoenix]

How would you define trading? Specifically how would you define trading without any definition that included the success or otherwise of the endeavour?

All the books, forums and websites attempt to define, teach, etc successful trading. That is where the volume comes in.....with the definition of success, not with the definition of trading.

Cheers,
PKFFW

I wonder if we can surpass the 850+ posts of the other thread?

Db

 

[trendie]

I never realised....all this effort I've put into running...It was a simple example to explain that things take on an entirely different perspective whenever there is a financial reward OR penalty involved. I'm learning to play the piano and frankly I couldn't care less if I am talented or not, I just enjoy it and I am progressing. It would be different if I was losing money every time I played.

strictly speaking, if you have a tutor you ARE losing money, since it is costing you £X per hour to engage the services of someone to tell you when you are doing it right, and where you are going wrong.
this is a feedback loop, not unlike an accounts statement showing you have made money, or lost money.

I am finding that the only talent required is the ability to keep trading when the initial euphoria has gone, and you are left with a tedious, repetetive task. (hence my unholy desire to replace my main analytic tasks with some sort of alert system, otherwise I am going to go MAD. MAD, I tell you, MAD. )

 

[Paul71]

What is the minimum return you need on your total base capital for trading to be realistically worth the effort?

What else could you do with your base capital to make money from it?

There needs to be some kind of basis for the 'talents' of the individual.

When does a person require enough 'talent', to be even considered as a trader?

There are a lot of arguements or difference of opinion, because there is no proof, there is no basis.

T2W is not a recognised body, it isn't chartered, nothing means alot on chat forums because everyone has thier own opinion.

Established and competent traders have a talent for trading, it's that simple. Some are better than others.

 

[new_trader]

Whether or not you are penalised every time you play the piano has no bearing on your skill or otherwise at playing the piano.

It would only have a bearing if you were penalised every time you played the piano unsuccesfully. If that were the case you may choose to quit trying to learn to play successfully so as to avoid the penalities for unsuccessfly playing.

Of course before penalties could be set you would need to define what is successful and unsuccessful playing. Would you wish to do so?

Cheers,
PKFFW

A hypothetical. You get a group of people who have no idea what trading is and have never been exposed to a price chart. You put them each in a room, alone, with a computer and a trading application connected to the market. You don't explain anything to them. There is only the trading application and nothing else to distract them. The 'Buy' and 'Sell' buttons are not labelled. Now, for the purpose of this hypothetical, they have let's say $1 million in the a/c. Also, lets imagine you could sequester them for 6 months. By trial and error a few might work out that when the wiggly line goes up after they have pressed one of the buttons the money in the a/c goes up and if it goes down they lose money, and so on with all the permutations. At the end of the 6 months you check to see who has the most money left in the account and who has the least. Do you honestly think it would have made a difference if you defined what "success" is first?

 

[Rhody Trader]

... At the end of the 6 months you check to see who has the most money left in the account and who has the least. Do you honestly think it would have made a difference if you defined what "success" is first?

You've just defined it.

 

[Grey1]

What are your thoughts/opinions/views?

NOPE. It does not IMHO it needs hard work

 

[nine]

Agreed Grey.

There are a lot of potentially profitable strategies. You have to do the hard work to find ones that suit you and then develop, test, and execute them well enough to make money.

 

[FXSCALPER2]

Agreed Grey.

There are a lot of potentially profitable strategies. You have to do the hard work to find ones that suit you and then develop, test, and execute them well enough to make money.

Exactly! That being the case, why do most people fail?

 

[PKFFW]

A hypothetical. You get a group of people who have no idea what trading is and have never been exposed to a price chart. You put them each in a room, alone, with a computer and a trading application connected to the market. You don't explain anything to them. There is only the trading application and nothing else to distract them. The 'Buy' and 'Sell' buttons are not labelled. Now, for the purpose of this hypothetical, they have let's say $1 million in the a/c. Also, lets imagine you could sequester them for 6 months. By trial and error a few might work out that when the wiggly line goes up after they have pressed one of the buttons the money in the a/c goes up and if it goes down they lose money, and so on with all the permutations. At the end of the 6 months you check to see who has the most money left in the account and who has the least. Do you honestly think it would have made a difference if you defined what "success" is first?

There are a number of issues raised by your post. I will deal with each in turn.

1: You assert that success has nothing to do with this thread. That being the case then I assure you that every single person in that room who ever managed to hit the buy or sell button has traded. That being the case your hypothetical example clearly shows that no innate talent is needed to trade.

2: You say "you check to see who has the most money left in the account and who has the least." The results would arguably show who had more success(ie: made more money) at trading. It has no bearing on who traded or if they needed some sort of innate talent to do so. Those who had the least amount of money left still completed the exercise of trading just as fully as those who had the most money. Only the results differed. I think we can all agree that results are a measure of success not of the ability to do a task that has no inherent measure of success.

3: Therefore your entire assertion that success has nothing to do with this thread is false. Your hypothetical example clearly shows that your definition of trading centres around the successful making of money from the financial markets.

4: Your hypothetical places an arbitrary time limit of 6 months on the event. Who is to say that if the people had more time to continue testing and learning they would not eventually complete the task to your definition of success?

5: All that being said, perhaps a more apt title of your thread would be something like "does it take talent to successfully make a profit from trading". It is clear from your hypothetical that this is what you are really asking.

Cheers,
PKFFW

 

[dbphoenix]

Exactly! That being the case, why do most people fail?

Because they don't do "the hard work to find ones that suit you and then develop, test, and execute them well enough to make money".

Db

 

[PKFFW]

Exactly! That being the case, why do most people fail?

Simple, because the vast majority of people do not "do the hard work to find ones that suit you and then develop, test, and execute them well enough to make money."

Talent will play a key role in the amount of success one achieves. Two people executing the same plan will have different results. This is because one will have more talent for the art of trading than the other. Assuming they are both making money on a consistent basis, does one making more money than the other mean that the one making less money is unsuccessful?

Back to the piano example.......I'm not musically gifted at all. My singing sounds like a frozen cat being run through a circular saw. My finger dexterity is minimal. My rythm makes most white men look good. I can still play some songs on the piano quite well because I put in enough time and effort to learn to do so. I can pick up the sheet music to most intermediate level songs and given enough time and practice I can play a passable version of them. Will I ever be a Mozart? No. Will I ever be a virtuoso? No. Will there be some songs that no matter how hard I try I just can't get right? Yes. Does that mean I can't play the piano......NO!

Trading is no different. Some will show more aptitude for it that others. Some will get it quicker than others. Some will have greater success at it than others. Many will "fail". That does not mean you need some sort of special gift or talent for it to achieve some level of success at it.

Cheers,
PKFFFW

 

[nine]

Because they don't do "the hard work to find ones that suit you and then develop, test, and execute them well enough to make money".

Db

I think that this is one element (and maybe the biggest one by far).

The second element comes because we didn't do that (or maybe we have history) and we damage ourselves in our initial trading phase and learn bad habits at a bunch of levels. Trading is different from many learning exercises because it involves money directly, we have to write our own symphonies, and we have to test and execute them (but its the risk that makes it most different from the piano - imagine a piano that would chop the tips off your fingers if you got something wrong too many times). Which brings many to the point referred to in this post (my now 4 x requoted (apologies, I won't do it again for at least 6 months but it resonated so well for me)) and Mark Douglas's work about why people screw up despite a good tested strategy:

Traders Prayer

Step One: Unconscious Incompetence.

This is the first step you take when starting to look into trading. you know that its a good way of making money because you've heard so many things about it and heard of so many millionaires.

Unfortunately, just like when you first desire to drive a car you think it will be easy - after all, how hard can it be?? - price either moves up or down - what's the big secret to that then - lets get cracking! Unfortunately, just as when you first take your place in front of a steering wheel you find very quickly that you haven't got the first clue about what you're trying to do. you take lots of trades and lots of risks. when you enter a trade it turns against you so you reverse and it turns again .. and again, and again. You try to turn around your losses by doubling up every time you trade - sometimes you'll get away with it but more often than not you will come away scathed and bruised Well this is stage one - you are totally oblivious to your incompetence at trading.Stage one can last for a week or two of trading but the market is usually swift and you move onto stage two.

Stage Two - Conscious Incompetence

Stage two is where you realize that there is more work involved in this and that you might actually have to work a few things out. You consciously realize that you are an incompetent trader - you don't have the skills or the insight to turn a regular profit. During this phase you will buy systems and e-books galore, read websites based everywhere from Russia to the Ukraine. and begin your search for the holy grail.

During this time you will be a system whore - you will flick from method to method day by day and week by week never sticking with one long enough to actually see if it does work. every time you came upon a new indicator you'll be ecstatic that this is the one that will make all the difference. You will test out automated systems on Meta-trader, you'll play with moving averages, Fibonacci lines, support & resistance, Pivots, Fractals, Divergence, DMI, ADX, and a hundred other things all in the vein hope that your 'magic system' starts today. you'll be a top and bottom picker, trying to find the exact point of reversal with your indicators and you'll find yourself chasing losing trades and even adding to them cos you are so sure you are right.

You'll go into the live chat room and see other traders making pips and you want to know why it's not you - you'll ask a million questions, some of which are so dumb that looking back you feel a bit silly. You'll then reach the point where you think all the ones who are calling pips after pips are liars - they cant be making that amount cos you've studied and you don't make that, you know as much as they do and they must be lying. but they're in there day after day and their account just grows whilst yours falls. You will be like a teenager - the traders that make money will freely give you advice but you're stubborn and think that you know best - you take no notice and over leverage your account even though everyone says you are mad to - but you know better. You'll consider following the calls that others make but even then it wont work so you try paying for signals from someone else - they don't work for you either.

This phase can last ages and ages - in fact in reality it can last well over a year - My own period lasted about 18 months. Eventually you do begin to come out of this phase. You've probably committed more time and money than you ever thought you would, lost 2 or 3 loaded accounts and all but given up maybe 3 or 4 times.



Then comes stage 3 Stage 3 -

The Eureka Moment Towards the end of stage two you begin to realize that it's not the system that is making the difference.

You realize that its actually possible to make money with a simple moving average and nothing else IF you can get your head and money management right You start to read books on the psychology of trading and identify with the characters portrayed in those books. Finally comes the eureka moment.

The eureka moment causes a new connection to be made in your brain. You suddenly realize that neither you, nor anyone else can accurately predict what the market will do in the next ten seconds, never mind the next 20 mins. You start to work just one system that you mould to your own way of trading, you're starting to get happy and you define your risk threshold. You start to take every trade that your 'edge' shows has a good probability of winning with.

When the trade turns bad you don't get angry or even because you know in your head that as you couldn't possibly predict it it isn't your fault - as soon as you realize that the trade is bad you close it .

The next trade will have higher odds of success cos you know your simple system works. You have realized in an instant that the trading game is about one thing - consistency of your 'edge' and your discipline to take all the trades no matter what. You learn about proper money management and leverage - risk of account etc etc - and this time it actually soaks in and you think back to those who advised the same thing a year ago with a smile

You weren't ready then, but you are now. The eureka moment came the moment that you truly accepted that you cannot predict the market.

Then comes stage four Stage 4 -

Conscious Competence Ok, now you are making trades whenever your system tells you to. You take losses just as easily as you take wins You now let your winners run to their conclusion fully accepting the risk and knowing that your system makes more money than it loses and when you're on a loser you close it swiftly with little pain to your account

You are now at a point where you break even most of the time - day in day out, you will have weeks where you make 100 pips a weeks where you lose 100 pips - generally you are breaking even and not losing money.

You are now conscious of the fact that you are making calls that are generally good and you are getting respect from other traders as you chat the day away. You still have to work at it and think about your trades but as this continues you begin to make more money than you lose consistently. You'll start the day on a 20 pip win, take a 35 pip loss and have no feelings that you've given those pips back because you know that it will come back again. You will now begin to make consistent pips week in and week out 25 pips one week, 50 the next and so on. This lasts about 6 months

Then comes Stage Five Stage Five - Unconscious Competence Now were cooking - just like driving a car, every day you get in your seat and trade - you do everything now on an unconscious level.

You are running on autopilot. You start to pick the really big trades and getting 100 pips in a day is becoming quite normal to you. This is trading utopia - you have mastered your emotions and you are now a trader with a rapidly growing account. You're a star in the trading chat room and people listen to what you say. you recognize yourself in their questions from about two years ago.

You pass on your advice but you know most of it is futile cos they're teenagers - some of them will get to where you are - some will do it fast and others will be slower - literally dozens and dozens will never get past stage two but a few will. Trading is no longer exciting - in fact it's probably boring you to bits - like everything in life when you get good at it or do it for your job - it gets boring - you're doing your job and that's that.

You can now say with your head held high "I'm a currency trader."

 

[laptop1]

Stage 1, Most fail to trade profitable.

Stage 2, 95% make it to this level and are profitable.

Stage 3, Now you need an understanding trading in SIZE. However, only 1% makes it to stage 3, the other 4 % move back to stage 2, where they're more comfortable trading smaller size.

 

[firewalker99]

The evidence only shows that a small percentage do learn to trade successfully. It does not show that only a small percentage can.

The reason people think it can be learned is simple. It is a skill. Skill can be learnt. Ergo, trading can be learnt.
...
People fail primarily because they are not willing to put in the effort to learn the skill required. They give it a try, do not do well and eventually give up.

Sounds like an excellent post to me.

Seriously though there are the naturally gifted among us and then there are the rest of us. Logic, experience and past results show that any skill set can be taught and learnt. The level of success one achieves in any endeavour will be greatly influenced on their natural ability. However if one tries hard enough one can learn any skill set to some level of proficiency and achieve "success".

The concept of "natural gift" is much overrated imo. As the word "talent" has been dropped so frequently on this thread, I thought I'd give you all some reading material for the weekend

The preponderance of psychological evidence indicates that experts are made, not born.

Analysis shows that "genius" is really a set of exceptional skills cultivated through disciplined study

 

[the blades]

I can still play some songs on the piano quite well because I put in enough time and effort to learn to do so. I can pick up the sheet music to most intermediate level songs and given enough time and practice I can play a passable version of them. Will I ever be a Mozart? No. Will I ever be a virtuoso? No. Will there be some songs that no matter how hard I try I just can't get right? Yes. Does that mean I can't play the piano......NO!

Trading is no different. Some will show more aptitude for it that others. Some will get it quicker than others. Some will have greater success at it than others. Many will "fail". That does not mean you need some sort of special gift or talent for it to achieve some level of success at it.

I'm not convinced the analogies hold. You can "have a go" at most things and the measure of your "success" is subjective.

If you "have a go" at trading, you are competing against the market - which will mop up all loose money.

Though no definitions of success have been provided, a simple one could just be to make money.With a piano it might just be to play a tune that can be recognised.

Unlike many other disciplines, you have to outperform someone else to achieve "success" in trading.....don't you?

UTB

 

[firewalker99]

Simple, because the vast majority of people do not "do the hard work to find ones that suit you and then develop, test, and execute them well enough to make money."

I am finding that the only talent required is the ability to keep trading when the initial euphoria has gone, and you are left with a tedious, repetetive task. (hence my unholy desire to replace my main analytic tasks with some sort of alert system, otherwise I am going to go MAD. MAD, I tell you, MAD. )

How many of those aspiring traders still enjoy refining and testing different parameters on their system, looking at charts each day, after having painstakingly spent hundreds if not thousands of hours trying to work something out?

I think people can only really excel at something which they really like doing. But most I suspect are attracted by the "quick and easy" way money can be made in the markets.

"...when it comes to choosing a life path, you should do what you love — because if you don't love it, you are unlikely to work hard enough to get very good. Most people naturally don't like to do things they aren't "good" at. So they often give up, telling themselves they simply don't possess the talent for math or skiing or the violin. But what they really lack is the desire to be good and to undertake the deliberate practice that would make them better...." - Stephen J. Dubner and Steven D. Levitt​

"If people knew how hard I worked to get my mastery, it wouldn't seem so wonderful after all."- Michelangelo

 

[Priceman]

Unlike many other disciplines, you have to outperform someone else to achieve "success" in trading.....don't you?

UTB

Well if that's the case then outperforming the 95% that fail should be easy then :cheesy:

 

[PKFFW]

I'm not convinced the analogies hold. You can "have a go" at most things and the measure of your "success" is subjective.

If you "have a go" at trading, you are competing against the market - which will mop up all loose money.

Though no definitions of success have been provided, a simple one could just be to make money.With a piano it might just be to play a tune that can be recognised.

Unlike many other disciplines, you have to outperform someone else to achieve "success" in trading.....don't you?

UTB

UTB,

Firstly, I almost agree with your definition of success at trading.....to make money. I would only differ in that I would say success at trading would be to make money consistently. Anyone can make money here or there. A successful trader will do so consistently.

Of course we are not talking about successful trading though, we are talking about the art of pushing buttons to buy and sell and the success or otherwise of consistently making money doing so is apparently not relevent to the discussion.

As for the analogies.....the point is that in those endeavours there is a measure of success(however that is defined) that one can achieve without the need to be naturally "gifted" or in some way "touched by the gods" at birth. I believe that it is the same with trading. One can achieve a level of success(consistently make money) without the need to be some "gifted" or innately "talented" individual. One simply needs to work hard and learn the skill set necessary.

Cheers,
PKFFW

 

[barjon]

..............................Unlike many other disciplines, you have to outperform someone else to achieve "success" in trading.....don't you?.........

UTB

blades

If you trade into the market your immediate "competitor" is the guy who has taken the other side of your trade, but the ultimate success of your trade depends on the combined force of the bulls vs the bears over the timescale you're operating in. Thus you don't have a single "someone else" type competitor.

If you trade via SB the same applies except you don't have that immediate competitor other than indirectly if the SB hedges your bet in the market. I suppose you could say that your immediate competitor is the bookie of course

good trading

jon

 

[black bear]

Another good post FW

How many of those aspiring traders still enjoy refining and testing different parameters on their system, looking at charts each day, after having painstakingly spent hundreds if not thousands of hours trying to work something out?

I think people can only really excel at something which they really like doing. But most I suspect are attracted by the "quick and easy" way money can be made in the markets.

"...when it comes to choosing a life path, you should do what you love — because if you don't love it, you are unlikely to work hard enough to get very good. Most people naturally don't like to do things they aren't "good" at. So they often give up, telling themselves they simply don't possess the talent for math or skiing or the violin. But what they really lack is the desire to be good and to undertake the deliberate practice that would make them better...." - Stephen J. Dubner and Steven D. Levitt​

Hi FW

Good post FW, I agree with your sentiments and Laptops post above.

I would add 2 bobs worth as per usual

A natural talent I think does exist in all things, I think you have to except and be honest regarding these limitations.

Step outside your limitations and

I am not saying don"t push it and improve

I am saying BEWARE push to hard =

NO FUN can result in if you push to hard and are not honest with yourself.

You can however build on what you have and improve and identify areas that you are good at and be a little selective in your trading endeavours

example, I was looking at Grey1 thread last night just looking if I get my head round that lot before I am 90 I will eat my hat

Software power, ye right Grey1

You can train a donkey to run faster, but he will never win the Derby

Steve Ovett,

sorry if its spelt wrong, another of my limitations

Andy AKA