Skill vs. luck in Forex trading

[Pat494]

There are 2 sides to luck. The obvious one of winning/losing individual trades is wrong.
But if you happen to find someone who is actually willing to help and has the knowledge too - that is lucky.
Rarer than hen's teeth.

 

[J Livermore]

I have to disagree with this.
Luck is not real...
Where as skill is.

Luck is just something we use to describe certain outcomes, or psychological states.
The player who left his lucky socks at home, and therefore has a bad game, isn't unlucky... or isn't without luck.
They simply no longer have a psychological buffer that makes them play better.

The sock itself doesn't have any special attributes.
It's the player perception of it.
That "luck" can be transferred to any item, or ritual - provided that person believes in it

When "lucky/unlucky" things happen to people... it's just variance.
Everything has a probability of happening.
And sometimes unlikely things happen

Nowler,

You are onto something with the perception of luck.

However, I would take it one step further. Luck is an opinion of an event based on knowledge (or lack of knowledge) and not a state of being.

Let me give an example.

Say I rolled a six sided die in a cup and shook it all around before placing the cup over the die on a table halfway between you and me. What if I were to peek under the cup without revealing the number to you? When we place our bets on what number came up there would be zero “luck” for me but only pure “luck” for you.

The action of rolling the die is the exact same event for the both of us but the perception is completely different. The same goes if two more people joined the bet and I whisper in their ears “It’s neither numbers two or five. Shhh don’t tell Nowler”.

Each person placing a bet in our situation would have a different amount of “luck” including the new players whom I gave hints to.

 

[Nowler]

Nowler,

You are onto something with the perception of luck.

However, I would take it one step further. Luck is an opinion of an event based on knowledge (or lack of knowledge) and not a state of being.

Let me give an example.

Say I rolled a six sided die in a cup and shook it all around before placing the cup over the die on a table halfway between you and me. What if I were to peek under the cup without revealing the number to you? When we place our bets on what number came up there would be zero “luck” for me but only pure “luck” for you.

The action of rolling the die is the exact same event for the both of us but the perception is completely different. The same goes if two more people joined the bet and I whisper in their ears “It’s neither numbers two or five. Shhh don’t tell Nowler”.

Each person placing a bet in our situation would have a different amount of “luck” including the new players whom I gave hints to.

My guess on the number wouldn't be "purely luck".
Luck doesn't exist... my guess rests on mathematical probability.
In fact, I have a 1/6 chance of guessing the right number because it's totally random.

You had the same chance as me until the point where you looked at the result, but then we ceased to be playing the same game. I continued to guess the outcome of a random 1/6 event, whereas you were playing the game of simple observation

 

[Atilla]

My guess on the number wouldn't be "purely luck".
Luck doesn't exist... my guess rests on mathematical probability.
In fact, I have a 1/6 chance of guessing the right number because it's totally random.

You had the same chance as me until the point where you looked at the result, but then we ceased to be playing the same game. I continued to guess the outcome of a random 1/6 event, whereas you were playing the game of simple observation

Top post Nowler.

That is a surgical dissection of what is perceived as luck for those peeps who lack your knowledge and perspective.

 

[J Livermore]

My guess on the number wouldn't be "purely luck".
Luck doesn't exist... my guess rests on mathematical probability.
In fact, I have a 1/6 chance of guessing the right number because it's totally random.

You had the same chance as me until the point where you looked at the result, but then we ceased to be playing the same game. I continued to guess the outcome of a random 1/6 event, whereas you were playing the game of simple observation

I wasn’t saying luck exists. Just the opposite. I thought I was clear in saying it’s not a state of being. I was saying it could be an OPINION based on knowledge (or the lack of knowledge) of an upcoming event.

Your guess couldn’t be perceived as luck because you consciously decided to choose a number.

It was the outcome of your guess that could be PERCEIVED as a type of luck if you will.

 

[Nowler]

I wasn’t saying luck exists. Just the opposite. I thought I was clear in saying it’s not a state of being. I was saying it could be an OPINION based on knowledge (or the lack of knowledge) of an upcoming event.

Your guess couldn’t be perceived as luck because you consciously decided to choose a number.

It was the outcome of your guess that could be PERCEIVED as a type of luck if you will.

I get what you are trying to say buddy, but it's the language you are using.
Even in the end of that, you say "a type of luck"... so not only does that infer that luck exists, but it suggests that there are different types of luck too

Yes, the outcome could be perceived as luck.
I agree.

But that person would be wrong.
The outcome was merely a random outcome based on a set of 6 possibilities.

 

[barjon]

I get what you are trying to say buddy, but it's the language you are using.
Even in the end of that, you say "a type of luck"... so not only does that infer that luck exists, but it suggests that there are different types of luck too

Yes, the outcome could be perceived as luck.
I agree.

But that person would be wrong.
The outcome was merely a random outcome based on a set of 6 possibilities.

The dictionary definition of luck is:

“Luck or good luck is success or good things that happen to you, that do not come from your own abilities or efforts.“

so, since your own ability or effort cannot influence the roll of the dice you could argue that a winning toss is luck and nothing else.

 

[Nowler]

The dictionary definition of luck is:

“Luck or good luck is success or good things that happen to you, that do not come from your own abilities or efforts.“

so, since your own ability or effort cannot influence the roll of the dice you could argue that a winning toss is luck and nothing else.

You could argue it alright.
A lot of things are argued... doesn't make them correct

 

[barjon]

The dictionary definition of luck is:

“Luck or good luck is success or good things that happen to you, that do not come from your own abilities or efforts.“

so, since your own ability or effort cannot influence the roll of the dice you could argue that a winning toss is luck and nothing else.

I take it that you don‘t accept the dictionary definition then?

 

[Nowler]

I take it that you don‘t accept the dictionary definition then?

It's not that I don't accept the definition.
I just don't think that luck is real.

Things happen.
Sometimes it was intended, sometimes not.

One can describe an outcome as being lucky, but at it's core, it had a probability or happening.


PS: For the record... I still use the word luck, lol
Go figure

 

[J Livermore]

so, since your own ability or effort cannot influence the roll of the dice you could argue that a winning toss is luck and nothing else.

When I was growing up I lost a number of board games because of a friend’s ability to “roll” the dice in a “random” manner.

If I had to do it over again I would have made him roll the dice in a cup.

 

[Atilla]

The dictionary definition of luck is:

“Luck or good luck is success or good things that happen to you, that do not come from your own abilities or efforts.“

so, since your own ability or effort cannot influence the roll of the dice you could argue that a winning toss is luck and nothing else.

Is that an oxymoron

I take it that you don‘t accept the dictionary definition then?

There are zillion things that can happen to any one person due to lack of ability or effort.

If one is happy to accept a simple definition out of a dictionary then one may equally accept...

Luck = same as = Lack of ability or effort = same as = lazy unemployed sausage not good at FA and broke.

So how does one determine Lack of Ability explains or accounts for luck or misfortune?


Throw mud and shit at a subject matter and see what sticks.



Personally, I still can't get over the trader who has powers to combine skill and luck. World is full of idiots. 😍😍

 

[Nowler]

Thanks lads...
You've ruined my life!

Every time I refer to luck, I think of this thread and ask myself what is wrong with me

 

[Atilla]

Thanks lads...
You've ruined my life!

Every time I refer to luck, I think of this thread and ask myself what is wrong with me

Out of habit I say the same wishing people luck. Saying things like I hope the probabilities of good events favouring you in your interview just doesn't sound the same.

If I buy a lottery ticket I know the odds are 1 in 14m. If I win it's purely because lady luck has smiled on me. If I win I know there are 13,999,999 unlucky losers out there.

 

[donald55]

Its majorly skill based. But luck does play some part too.

 

[Atilla]

Its majorly skill based. But luck does play some part too.

Can you expand on what you mean please Donald. How or when does luck come in to trading?

Price movement has three possibilities. Up / Down / Sideways move.

Trader has two options to go long or short.

Just saying luck leaves us all none the wiser as to what traders mean when they refer to skill luck knowledge and information etc...

 

[barjon]

Can you expand on what you mean please Donald. How or when does luck come in to trading?

Price movement has three possibilities. Up / Down / Sideways move.

Trader has two options to go long or short.

Just saying luck leaves us all none the wiser as to what traders mean when they refer to skill luck knowledge and information etc...

Ok, at, hope you don’t mind me butting in. Say that your “skill” at reading the market leads you to enter short, but the market steams up until it’s a point away from your emergency stoploss. At this point there is an unforeseeable dramatic event that sends the market into a temporary nosedive allowing you to exit at a good profit before it turns round and recovers fast to finish the day well above your stoploss level.

So, you have been wrong in your reading of the market. You have been saved from loss by a wholly unexpected event and finished with a profit because it came just before your stop was hit. That’s what I’d call luck.

 

[Atilla]

Ok, at, hope you don’t mind me butting in. Say that your “skill” at reading the market leads you to enter short, but the market steams up until it’s a point away from your emergency stoploss. At this point there is an unforeseeable dramatic event that sends the market into a temporary nosedive allowing you to exit at a good profit before it turns round and recovers fast to finish the day well above your stoploss level.

So, you have been wrong in your reading of the market. You have been saved from loss by a wholly unexpected event and finished with a profit because it came just before your stop was hit. That’s what I’d call luck.

Barjon matey, never are you or anyone else butting in. Yours and everybody elses posts are always a delightful welcome.

More the merrier and all knowledge is good. Just depends how people choose to use that information.

I don't see your unexpected event as an unforeseeable dramatic event without some indication of what it is. There are many big moves in the market with players coming in with large quantities of buy or sells. Even more so in our current climate. The whole game is about hiding the real quantities one has and weather ones pumps and dumps or dumps and buys. Hiding stock in ones hands and feeding market to make best prices is the game market makers and brokers play every day.

If your dramatic event refers to some force majeure or an act of god (not that he such a thing exists) then that in effect is news. So are we talking an earth quake, pandemic, 9/11 or unexpected raising or dropping of interest rates, profits or loss? I've observed what you are suggesting long time ago and lost many Ks on it. Especially interest rate moves. For example interest rates would rise and indexes would tank. Some analyst would come on BBG tv and say we now in a boom market and interest rates indicate recession is over and then markets would shoot up. On other occasions rates would fall. Markets would rise and another analyst would say the CBs are worried about a slow down and they are easing monetary policy.

Even Earthquakes can be predicted to a few years now with tremors indicating possible activity. Same for Volcanic eruptions. We know where fault lines are. Pandemic frequency is on the increase. Global warming is on the rise. Floods are on the rise too.

Question is are you in the market or out of the market when high impact big news is released.

The moment one starts asking questions and starts looking at potential risks then a trader should consider some level of stop loss so the event doesn't take one out of the market.

However, the probability of these events and the really big ones are far and few in between. Boeing's recent fortune may be considered bad luck news if you happen to own shares. But good news for Airbus. If you are just quoting some totally random act that moves anything and feel you benefit all well and good. But for the professional trader when discussing trading - talking and referring to luck is just a load of tosh. It really is.

If markets go up on average every 2/3rd of time periods and drop 1/3rd then you might get luckierrrr if on average you take longs on 2/3rds of the time. But this sort of stuff takes analysis and market watching and some leg work to calculate ATRs and time periods. It's not luck if you win because you are trading on probabilities. I have a friend who is perpetually short because that's when the big falls come and market tear down is much more rapid then build up. However, as many times as I try to explain he is more interested in the buzz of making big money quickly then working at trading with probability on his side. Got FA to do with luck. However, when such people do get lucky, rather calling it luck, they feel they had some premonition that it was their skill in predicting the fall or rise or what ever.

If it is a random event - what you describe then a similar event may cause markets to go up.

Considering the whole of human nature is geared around work and improving things it's not a big surprise to guess on the whole markets will rise as a lot of work effort goes into making the whole globe work.

I do feel we need to move away from this simple small talk of -

I was wrong but I got lucky - I won. OR I was right but the market moved against me - I lost.

Both views mummify the brain wrapping it up in blabbering nonsense.

Having said all that as before Technical Analysis imo is just historic view on the movement of prices to identify support and resistance levels. It is Fundamental Analysis and NEWS which moves markets. So to say one gets lucky is stating I don't care what the event is on this occasion I made money.

On the other hand for example whilst the pandemic may have caused many to suffer loss or fall in income, those who move into making Masks, Shields and Perspex barriers are milking it.

I think I've said enough. In summary, referring to luck is a lazy reference to avoiding analysis of an event without any context for past or future events. Has no place in trading.

 

[Atilla]

Here is a good read. For all those who refer to luck in describing their observations. Worth counting the number of times 'luck' comes up in Taleb's article.

‘Black Swan’ author says that if investors don’t use a ‘tail hedge,’ he recommends ‘not being in the market’: ‘We’re facing a huge amount of uncertainty’

Speaking during an interview on CNBC on Friday, the popular author Nassim Taleb, offers the notion that investors should be hedged against so-called tail...

www.marketwatch.com

That’s “Black Swan: The Impact of the Highly Improbable” author Nassim Nicholas Taleb offering his view on the risks swirling in the market and a growing lack of clarity about the future in the era of a deadly pandemic that has created a public-health and economic crisis.

Speaking during an interview on CNBC on Friday, the popular author, shared the notion that investors should be hedged against so-called “tail risk,” which refers to extreme events that have a low probability of happening in a distribution of outcomes. Taleb has spent his career chronicling so-called “tail risk” events, which have a tiny probability of occurrence, but nonetheless take place more often than one would guess, and therefore often are underestimated by the broader investment community.

 

[PaulyZ]

Somewhere luck matters in trading.