The Role of Luck in Trading

Luck… it’s a loaded word. Depending on what has been happening in your trading, whether you’ve been winning or losing, you might be tempted to think you’ve been having good luck or bad luck. But is luck really a factor in trading at all, no matter how it might feel? Can bad luck dog a trader? Can you have a lucky winning streak? Just what is the role of luck in trading?

Are Your Trading Results Random?

Whether you trade stocks or forex – one question to ask yourself when you are debating the role of luck in trading is whether your trading results are random or not. If they are, and there is nothing you can do about them either way, then it could be said that luck has a part to play in whether you win or not.

Conversely, if your results are not random then luck has nothing to do with it.

So which is it?

It depends on how competent a trader you really are, and how much time and care you take over deciding where and what to trade. For those just starting out, or those who like to dabble, and especially those who think trading is about making a ‘quick buck’ rather than needing to put any hard work into it, it will all be about luck.

That’s because their results are going to be random. They won’t be able to predict – as far as anyone can in trading, of course – which trades will work for them and which won’t. They won’t be able to stay away from trades that are potentially profit wiping, nor will they know which trades they can put a little more money into because they are more likely to come off than others.

For them, it’s a matter of sticking a pin in a piece of paper, or closing their eyes and pointing. However they cut it, they are just guessing, and this randomness can lead them to think that luck is on their side, or not.

For those who take more time over their trading career and put a lot of effort into studying the markets and creating strategies and trading charts, honed over many months or years to be as precise as possible, the results of their trades are less likely to be random.

They will be able to know which to take and which to ignore (even if that means not trading at all for a day, a week, or longer). Their results will be predictable and known, and luck won’t factor into their trading at all. They won’t need it to. They’ll be winning more than losing without having to clutch at a four leaf clover or a horseshoe or any other lucky talisman.

You Cannot Rely On Luck

If you want to be a successful trader then you cannot rely on luck whatsoever. It is meaningless. One moment you might win, then next you could lose it all and more. It makes trading unpredictable and uncomfortable, turning something that, in time, could bring in a good profit and give you an excellent second income, into something that loses you money, wipes out your savings, and puts you in financial difficulties. Luck is just not worth it.

If you want to get into trading then you need to put in the work first. Learning as much as possible about the different types of trade as well as the different strategies involved means that you can go into your trading career with your eyes open.

You will know that you can’t rely on having a lucky winning streak – you can instead make your streak a winning one by knowing which trades to pick. When someone else’s luck runs out and they start to lose, you’ll be able to keep going, safe in your trading knowledge and experience.

Don’t Get Overconfident

Of course, just because you can predict winning trades doesn’t mean all your trades will win. The markets are notorious for their volatility, and even if your charts match up perfectly and your strategy falls in line with everything that it is mean to, just one serious news story can change the face of a number of different trades, turning something that would have netted you a profit into a decisive loss.

So no matter how confident you are in your abilities to trade well, you should never be overconfident. If you are overconfident you will start to trade with more than you should – more than is safe. If a loss comes you could ruin your hard won profits, losing them all at once. No matter how great a trade looks, the key is to only use what you can afford to lose because, after all, you might not be lucky all the time.