The Truth About Luck

Creating Your Own Luck in Trading

The 4 Types Of Luck

We all need a bit of luck.

Price just misses your stop by a tick, you happen to be at the screen to take profits on a price spike, or you start your trading career during a nice volatile market period.

I could go on and on.

Like it or not luck plays a role. (That’s a tough pill to swallow sometimes, we like to think trading is 100% skill!)

Let’s look at the four types of luck:

Blind luck

This is sheer chance, like winning the lottery. An example of this in trading would be going long on a stock that suddenly has a takeover bid no one suspected. You can’t do anything to influence this, it’s just the right place, the right time. You just take your profits and thank the market gods.

Luck from motion

This one you can influence a bit more. Just by the sheer act of forward motion, you are more likely to stumble across luck. Keep showing up and putting yourself in a position to get luckyIn the trading world, this could be getting prepared each day, showing up, setting your alerts, and operating in a manner that gives you the best chance of encountering some luck.

Luck from awareness

This one’s a bit more interesting. You spot an edge in the markets, an unusual pattern, a time of day algo, or some other edge  you can take advantage of. This only works because of:

1 – Your market and price action knowledge
2 – Being in a position to observe the edge

In a way, it’s your unique skills and experience that allow you to capitalise on this luckPut anyone else in front of the same opportunity and they won’t see it.

Luck from uniqueness

Top-level luckThis is as close to making your own luck as you can get…

Your persistence and focus in forward motion in one direction combined with your experience and personality. At this stage, luck finds you. (This could also be another person seeking you out).

Imagine you are studying the charts for a new strategy, and you are relentless in this. Week after week you study, learn, and improve. Until one day you ‘stumble’ across a pattern that isn’t in the textbooks, it isn’t a short-lived edge and is something you can capitalise on for a long time.

Or perhaps you get a call from a fellow trader who knows who you are. He has a special edge and he needs you to help him get the most from it. These things only happen because of who you are and what you do.

Personally these different stages of luck bring me comfort.

Several times in the past I’ve been fortunate enough to capitalise on big edges in the market, which I thought was luck.

It turns out they were luck, but not blind luck.

I got lucky because I relentlessly pursued trading, I put in the time, effort, and stuck around until I ‘stumbled’ across some luck

Today, think about how you can make your own luck. What steps can you take in your trading to ‘stumble’ across good fortune?

Make that persistent effort.

Be there at the right times and connect with the right people. (This one is overlooked as a trader, but being around fellow traders is a luck multiplier).

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Sahil Bloom

This is a great article on luck by ex-investment manager Sahil Bloom. He approaches things slightly differently but I really enjoyed the article.