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Skill VS Luck - Becoming a Consistently Profitable Trader
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Hi traders, here we are on another workshop. Today I'll be sharing some of the points on differentiating skill or luck trading. Majority of the traders have absolutely no clue on are they doing the right things or not? Here's a few key points:
Skill
1. Winners and Losers
- If you are a skilled trader, you're someone who understand the probable and possible in trading. There's no guarantee on any single trade whether it's a winner or loser. Remember, the short-term outcome in trading is completely random, what's more important is to come out being profitable in the long-term. Never judge your performance based on the short-term outcome, think long-term.
2. Good Risk Management
- Good traders always have effective risk management in place. Not any single trade is able cause damage on their capital, and they truly understand how to detach themselves from negative emotions.
3. Repeatable
- Good traders have a repeatable process, that allows them to tackle the market in the same way every single day.
4. Proper Planning
- Good traders rarely deviate from their initial plan, as they understand that a planned trade is a good trade regardless of the outcome. Any trade taken out of impulsive behaviour, is considered a bad trade regardless of the outcome.
5. Consistency
- Good traders have a set of routine and action plan. To achieve consistent results, you must have a consistent performance.
6. Execution
- Good traders have little to no hesitation when it comes to executing their trades. They execute their plan without second guessing or doubt.
Luck
1. No loser
- Most gurus' or lucky traders would promote themselves having 80% - 90% strike rates, which could never happen in reality. The only way you can achieve such a high win rate is to have a Profit Factor of less than 1. In fact, most of the best traders out there have a strike rate of 40-50%.
2. Excessive Risk Exposure
- Losing traders have no idea how to isolate themselves from a bad state of mind. They're constantly putting up a lot of risk on the table regardless of having no clue on what's going on in the markets. The sense of urgency is rushing them on taking unnecessary risk.
3. Unrepeatable
- Losing traders constantly take trades out of their trading plan, which is not duplicable. If you're taking trades that is unrepeatable, most likely it's a lucky trade and you shouldn't be happy about it even if it turns out to be a winning position.
4. Impulsive Behaviour
- Losing traders deviate from their initial plan due to uncontrolled emotion. They're taking trades they're not supposed to take, then regrets later on.
5. No routine
- Losing traders have no daily routine. They're always blind firing all over any 'seems' profitable position. Most of them possess of potential over-trading habits.
6. Hope & Praying
- Losing traders are constantly looking for the 'best trade' that'd give them an enormous return. Most of them have no trading plan and proper Risk Management in place, causing them to experience an emotional rollercoaster on any particular position when it gets out of hand.
"Chains of habit are too light to be felt until they are too heavy to be broken." - Warren Buffett
Let me know in the comment below what's your worst trading nightmare!
If you enjoy the content, make sure you follow my profile and give me a thumbs up for daily fx forecast & educational content.
Skill
1. Winners and Losers
- If you are a skilled trader, you're someone who understand the probable and possible in trading. There's no guarantee on any single trade whether it's a winner or loser. Remember, the short-term outcome in trading is completely random, what's more important is to come out being profitable in the long-term. Never judge your performance based on the short-term outcome, think long-term.
2. Good Risk Management
- Good traders always have effective risk management in place. Not any single trade is able cause damage on their capital, and they truly understand how to detach themselves from negative emotions.
3. Repeatable
- Good traders have a repeatable process, that allows them to tackle the market in the same way every single day.
4. Proper Planning
- Good traders rarely deviate from their initial plan, as they understand that a planned trade is a good trade regardless of the outcome. Any trade taken out of impulsive behaviour, is considered a bad trade regardless of the outcome.
5. Consistency
- Good traders have a set of routine and action plan. To achieve consistent results, you must have a consistent performance.
6. Execution
- Good traders have little to no hesitation when it comes to executing their trades. They execute their plan without second guessing or doubt.
Luck
1. No loser
- Most gurus' or lucky traders would promote themselves having 80% - 90% strike rates, which could never happen in reality. The only way you can achieve such a high win rate is to have a Profit Factor of less than 1. In fact, most of the best traders out there have a strike rate of 40-50%.
2. Excessive Risk Exposure
- Losing traders have no idea how to isolate themselves from a bad state of mind. They're constantly putting up a lot of risk on the table regardless of having no clue on what's going on in the markets. The sense of urgency is rushing them on taking unnecessary risk.
3. Unrepeatable
- Losing traders constantly take trades out of their trading plan, which is not duplicable. If you're taking trades that is unrepeatable, most likely it's a lucky trade and you shouldn't be happy about it even if it turns out to be a winning position.
4. Impulsive Behaviour
- Losing traders deviate from their initial plan due to uncontrolled emotion. They're taking trades they're not supposed to take, then regrets later on.
5. No routine
- Losing traders have no daily routine. They're always blind firing all over any 'seems' profitable position. Most of them possess of potential over-trading habits.
6. Hope & Praying
- Losing traders are constantly looking for the 'best trade' that'd give them an enormous return. Most of them have no trading plan and proper Risk Management in place, causing them to experience an emotional rollercoaster on any particular position when it gets out of hand.
"Chains of habit are too light to be felt until they are too heavy to be broken." - Warren Buffett
Let me know in the comment below what's your worst trading nightmare!
If you enjoy the content, make sure you follow my profile and give me a thumbs up for daily fx forecast & educational content.
Nota
Previous workshop on "Examining Rejections - Probability of Success"
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