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Just my 2cs and have penned down a lil more than i should have. There is and cannot be one definitive answer. Though I find it is a skill.
A) Trading a Problem:- For many i think it is a problem as there is no certainty in the decision making tool. And thats where i think the problem lies. A tool is just a tool....how can you be certain in trading. Most people believe a tool should be 100% accurate and tools are accurate maybe in hindsight. But spot of the moment analysis might not be correct by the individual though his/her tool shows something.
Also a reason for many to have lost...before even understanding the in/outs is the biggest hurdle when under capitalized. This is also a problem reason....that many try to explore before cash runs out. Well this is where i think a disciplined trader can paper trade..but there are different schools of thoughts on this. It takes sometime and that time can differ from individual to individual since there is no school for learning this. Yes there are schools and one can expect to get a job as a editor/analysts or something after the finance stuff they teach in schools....but that is different from a trader who has become successful.
Hence comes the need for constant search to gain insight. Also many of the people who are successful had a good mentor or friend or someone who taught them. This is where a Luck factor comes in. Did the Trader seeking to trade find or come across such a person. If not the chances are again reduced as Success mimics success.
B) Skill:- For people who have mastered or understood the rules of this game....know that it needs tremendous skill / countless hours of introspection to gain context. And REALIZE that even if everything is correct...there is no certainty in the trade. It is just a probability. Now the analysis of trying to analyze a wrong trade if all context is proper is good...over analyzing or failing to analyze may not be a good things.
The reason you cannot be 100% certain needs to be understood. Herein lies the problem. It cannot be. There are countless individuals / firms / countries trading. The presence or absence of any of these on a trading day may put an indicator / system / tool which has confirmed before to not confirm a trade any Given Day (Any Given Sunday - the 1st movie i bought )
A successful mentor increases the chances of success. It also helps to validate and bounce of ideas. This is important i think unless a individual is so skill ful that he / she does not need one. A real-time mentor if one can find one is the Best but thats not normally possible. Again Luck plays a role.
Skill / emotion or whatever you call it...to accept a trade is not correct and get either stopped out or close a trade is a sign of skill. Many including me in the past have failed to adhere to this very simple task...believing we are 100% right. Thats a big fallacy.
A skilled trader has full control on Risk elements. They have this pat under control as his/her systems can be 100% accurate and still fail Any Given Day/Sunday .
A skilled trader also finds opportunity where others are scared or have not spotted something. Skill factor is a definite.
Am discretionary so have never explore systems. But am guessing the folks who are good at system trading also have an excellent level of skill.
synops:-
What must be understood.....is if someone has good knowledge which translates into skill....every turn in the markets is predictable mealtime without any patterns and such or with patterns and whatever one uses. However markets are still a probability which even after this tremendous insight cannot be 100% certainty due to many other factors such as News/Geo-political/Fx /Yields changes...etc etc and the list goes on.
Well...this can go on and on. However for me i think this occupation or vocation or en devour in Trading needs a High Degree of Competency which comes from well ingrained skill levels to analyze / mitigate risk. However the learning i think never stops. A good trader is always there to up her/his level. It may be different from a trader trying to seek a solution to the world of trading. And there is always an element of luck in life......so also in Trading
If trading was just a problem waiting to be solved, then the best mathematicians or the guys with deepest statistical understanding would be the best traders. This is true sometimes, however it often isn't the case because it's that intuitive skill that these sort of people are lacking. This type of skill takes years to develop and can't just be taught or proven by analyzing data sets, hence why most successful traders have taken multiple years and attempts to develop into what they do now.
However, trading is still a problem waiting to be solved. It's just without the skill you're never going to solve the problem.
"Free markets work because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or incentives for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can"
Thanks for bringing up this excellent thread and topic, which is misunderstood by many aspiring traders! As Peter mentioned well in his recent webinar in 2018, many traders have an Amateurs' view instead of Professionals one on the topic of trading skill development and waste their time and talents on activities that do not lead to trading SKILL development.
People with a Professional mindset know that trading is very similar to High-Performance Action sports/games. They realize that top performers are not born but made and that spending a long time on a subject alone is not enough for mastery. Professionals were not obviously experts from the beginning and not just lucky, yet they somehow managed their time and talents differently.
The Science of Expertise in the past two decades has identified some key elements that show how professionals across a wide range of fields, from musicians to athletes, to surgeons, to chess players, and traders can train themselves from nowhere to average to elite performers.
To my understanding, half of the success depends on the Trader's professional mindset/attitude to be COACHABLE:
- Understand the 80% of success comes from Skill development and a small percentage from the knowledge of trading
- Have Flexible Adaptive Mindset - Resilient to withstand/recover quickly from difficult conditions
- Low ego and humble attitude to listen to the coach's feedback and implement it
- Patient to go through repetitive drills and not get bored
- Responsible and Honest/Transparent person willing to work hard
Another half depends on how traders research and put themselves under a High-Performance Coaching system that incorporates all elements of Deliberate Practice, an active process of skill development. A successful coach in the same field needs to develop a deliberate practice coaching system that has Level Evaluation+Setting Specific Goals+Repeated Focused Practice drills+Constant Instant Feedbacks.
I am a discretionary trader and I agree with you especially regarding the skill development, ego and attitude.
I also think a right methodology can be taught to "the right minded" trader. Unfortunately, finding an individual which is a successful trader and successful coach, and also willing to teach, is almost impossible.
Best!
Very good point and that is very true! Half of the success in trading depends on the: Professional Trader’s Mindset/Attitude: The trader should understand the true nature of the trading business and be fully prepared to invest in developing a high level of competency to develop the skills required for success in trading.
Many aspiring traders do not understand the true nature of trading and think it is similar to other academic disciplines that one can take a course and get a degree from a college/university and start a career with consistent income for many years. The fact is that trading is similar to the elite level High-Performance careers so there are many common traits between top traders and professional athletes, musicians, artists, physicians, etc.
All rigorous research studies by more than 100 leading scientists who have studied top performance in a wide variety of domains are compiled in The Cambridge Handbook of Expertise and Expert Performance, which showed that Experts are always Made and not Born. These studies indicated that it will take several years to achieve High-Performance Skills and there are no shortcuts. One will need to invest that time wisely, by engaging in “Deliberate Practice” — a practice that focuses on tasks beyond a person's current level of competence and comfort.
The journey to truly superior performance is not for the fainthearted or the impatient person. The development of superior skills requires struggle, sacrifice, and honest painful self-assessment, so one needs to become a coachable person and work hard with his/her coach to master complex high-performance skills.