There is a saying, if you are an average person you believe you are smarter than the average. In the context of this forum though I assume it's about the ability of the average person to cope with uncertainty.

The shittiest part is that even if one excels in studying data science, stats and the theory of probability it is still exceptionally hard to overcome one's own tendency to self-destruct.

There is good book on the subject, Strange Life of Ivan Osokin. The protagonist gets a chance to re-live his life from school years and still messes things up.

Free text if someone is interested: https://selfdefinition.org/gurdjieff/Ouspensky-Strange_Life_of_Ivan_Osoukin.pdf

ursus 

There is a saying, if you are an average person you believe you are smarter than the average. In the context of this forum though I assume it's about the ability of the average person to cope with uncertainty. The shittiest part is that even if one excels in studying data science, stats and the theory of probability it is still exceptionally hard to overcome one's own tendency to self-destruct. There is good book on the subject, Strange Life of Ivan Osokin. The protagonist gets a chance to re-live his life from school years and still messes things up. Free text if someone is interested: https://selfdefinition.org/gurdjieff/Ouspensky-Strange_Life_of_Ivan_Osoukin.pdf

Interesting book. I may read this next week and thanks for sharing @ursus. I just finished watching the US television show, The Good Place for the second time, which expands on this idea and considers this: What if we have multiple chances to 'get it right', in this case get into the 'Good Place' in the afterlife? Can humans make incremental improvements if we 'reboot' our lives or get second, third (or in one case 802) tries, with only a sliver or our previous memories to guide us? If given the chance, I think we do, even if the changes are very small.

Applying this line of thinking to trading, we have to approach our work as a manufacturer would (Kaizen/continual improvement, Theory of Constraints, etc.), where we need to get better with each trade, each cycle, and each system we implement. If we do not, we will be caught in this vicious negative feedback cycle and suffer the fate of Ivan (presumably...I'll let you know after I read it). I know @kevinkdog could probably talk to this from the perspective of an aerospace engineer turned algo trader. He applies the same types of statistical analysis and measurement to monitor his trading systems he used in his prior career, and teaches the same in his workshops, articles, and videos.

The best example of continuous improvement in discretionary trading on this site that I know is @snax, whose journal(s) I have been following for a few years (with all due respect to the hundreds of members whose journals I have not read). He methodically records trades and charts, what he saw, what was happening, and he has improved. Impressive stuff.

Being smart is not enough and not even necessary to be successful in trading. Being able to improve with each trade iteration is.

vmodus 

Being smart is not enough and not even necessary to be successful in trading. Being able to improve with each trade iteration is.

This statement is gold!!

I have talked to 1000s of traders over the years, and in general, the smarter a person is (or maybe the smarter a person thinks he or she is), the worse they will do at trading.

"Humble intelligence" - the ability to admit you do not know something, or that someone is better than you, or that you need to improve, is a key success factor in trading. Most people do not possess this.

Intelligence as measured by IQ has never been something I have seen associated with successful trading. Of course, we have a very small sample of successful traders to work form. Of those that are successful many of those are going to be just lucky. So we don't really have good data to work with there.

What you know on the other hand is incredibly important. All trading can be distilled down into taking in input, analyzing it, and outputting trading decisions. What you have available to take as input, and the type of analysis you can run on your input is in effect everything. Even how how manage your psychology fits into this framework. That may explain why more humble traders tend to do better. The less confident they are the more likely they are to search out alternative data and types of analysis.

However, it's also important to acknowledge that financial markets continue to see huge changes largely related to the development of more sophisticated technology and forms of analysis. In the 80's we had floor traders who were eventually replaced by electronic trading. After the 2001 crash many retail electronic traders were wiped out, and after 2008 market making by robots completely dominated markets. Now more recently we are seeing a revolution in the area of machine learning. Such developments are where the biggest opportunities for traders come from, but they are starting to involve very complicated subjects.

Of course, there are still things that robots are not good at. Being able to interpret news and how that could affect future perceptions of fundamentals or perceptions about future order flows is something machine learning science hasn't figured out very well yet. That's why I say that having some sort of informational edge is a critical factor. However, it is likely that we will continue to see such strategies grow, and it will be a lot easier to compete if you understand the science behind it.

This thread has had everything from movie masala to high level geeky talk.

I'm a relatively dumb person by this forums standard, I'm also not consistently profitable trader (I've been at it since 2015 on-off), so take what you will from this.

In my years of trading and associating with people from all over the world in this field, I've made some simple conclusions that not many newcomers like to hear.

1. In words of NItin Kamath, CEO of the largest retail broker house in India, more than 99% retail traders are loss making in first year. People were talking numbers somewhere closer to 80% but I feel it is understatement. Also there could be other factors affecting it, as in number of years slugging out may reduce chance of failure, so probably number of years spent in the field maybe inversely proportional to the likelihood of failure. Assumption is you use those number of years to improve yourself with each passing trade and day.

2. It's an extremely rare thing to experience consistent profitability across large period of time (if at all), for me if you manage it for more than 6 months it's an already great achievement. Market just changes too much these days. In last year alone, I've had multiple of my strategies which were making money before gone bust.

3. Having edge doesn't equate to making money either, at the end of the day "you" are the key to success or failure. This is a gray area where someone may fool themselves in thinking that they have "mastered the market" or "have sellable strategy" or worse "trading strategy could be bought or thought"

4. Given above 3 points, it's nothing short of surprise to me that many people on social media claim to have some kind of holy grail. And why they should provide proofs of it is because if you are posting it on social media with intent to sell something its by no means wrong of someone to ask the proof of products/service quality. Red flags go up immediately if those are not provided.

Having said that, it's also important to respect people's views and opinions, so considering that I'm no authority to declare anyone legit or not, I don't like to be the one to do the "asking of proof", unless I'm being treated like potential customer. However, it can't be stressed enough times that because of the nature of this business, mostly you will run into snake oil salesmen, so its better to hold on to your money tightly into your pockets.

5. Markets are best teachers, you will likely learn lot more from trading very small amount than spending it on courses or joining trading rooms. Given that you are the type of person who learns from your own mistakes, learn from others mistakes too but again not everyone's ego allows them to be forthcoming of their own mistakes for you to learn from it.

I "feel" that these are the basic underlying reasons for things being the way they are, as much as people like to get rich by trading, at least in their ambitions and dreams, its first better to be in the shoes which can afford years worth of failure. Many startups never think that way, everyone thinks they are genius after making a dollar.

Thx for the post. I find Traders don?t set Targets. No one can time the market. However if you know how to set the proper targets (based on corrective or impulse waves,) you can take profits before the intended reversal. When the target is hit, profit comes out regardless. The targets I set and maintain are based on the Fib sequence. I?ll post more on this but lacking time now.

matthew28 

Is this one of those "asking for a friend", type questions? My own thoughts from my own struggles: Practical things: The market can only go up or down, how hard can it be. Then they realise it is very hard but feel they are close to being profitable, unfortunately that feeling of being just 'almost there' can last a very long time. They focus on trying to cut out losses and get a very high win rate and look for 'Holy Grail' indicators and never find it. They continuously go back to in effect starting again and again by frequently changing everything they do or use. Also purchasing new methods and system to the same effect. In built psychological traits: Trading is counter intuitive, animals and humans are most comfortable following the pack yet the Buffett quote “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” can result in much better risk to reward. Instinctive following the herd is frequently chasing momentum and that can produce lots of little profits but quick large losses when price suddenly reverses in a squeeze. But people like high win rates because we don't like being wrong seeing it as a reflection on our own analysis rather than a probabilities game. We are uncomfortable with uncertainty so wait for lots of confirmation which can result in worse trade location and poor Reward/Risk. Often the best trades are the hardest to take because they are going against current momentum. People try to cope with their emotions high jacking themselves by telling themselves they need to trade like a machine which is impossible so they can't. They can't beat a machine for being able to follow a rules based system and the only advantage they have over a machine is that they do have emotions. They might benefit from listening to their empathy and emotions because a lot of other traders will be feeling what they are feeling which means that it can be a window on what the 'competition' is feeling, eg, I strongly want to chase the market higher as it keeps legging up without me, I can barely resist pressing the buy button, a lot of other people are probably doing the same so looking for a short after what looks like their final capitulation flush higher could be a much better trade. Probably better to listen to your emotions rather than trying to suppress them in fear of being caught up in them and acting impulsively. Traditionally people get jobs that pay them for turning up and doing something. With trading you can turn up and at the end of the day, you're down money and are often angry with how you performed. Paying to be kicked in the b*ll*cks on a regular basis isn't anybody's idea of a dream job which can make it hard to inspire the motivation to work on improving. The markets can be different every day and results are inconsistent and some days can just be lucky. Focusing on probabilities, performing well and ignoring the day to day results and concentrating on the long term expectancy. Unfortunately we prefer instant gratification and are not good with waiting for long term results to play out. So basically I think trading well can be uncomfortable and go against our natural instincts which makes it very hard to do in real time, yet at the end of the day we think it is very clear what we should have done, or what the market was going to do so we try again the next day. Unfortunately that is frequently ingraining the bad habits instead of trying to produce new learning habits and behaviours. Retail versus professional: And lastly, retail traders are often trading in a vacuum with only online strangers of indeterminate ability and unknown truthfulness for reference. Professional traders on the other hand have a support system where they can see people being successful using the same equipment and tools that they have which provides motivation. They are expected to behave professionally and work hard at improving with pre-market analysis, extensive post trade journaling of things they did badly and things they did well (from what I have read, I have no first-hand experience). Writing down how they can work to improve or reduce the things that went badly, and also focus on and continue to do the things that work well. They set goals and measure their results in achieving those goals. It is serious work whereas retail traders can often see it as an easy get rich quick hobby, side gig, part-time job. The ones who succeed are the ones who don't just work hard (often traders who are losing money are working very hard to improve too), but they are systematically working to improve themselves: 1. Identify a trading problem. 2. Develop a solution. 3. Determine how I will implement the solution. 4. Measure the effectiveness of the solution. Repeat. (A selection of thoughts, probably some more valid than others IMHO)

I read this an wonder if you've been spying on me.

spencer1155 

I read this an wonder if you've been spying on me.

Haha, after trying trading for a while I imagine we've probably all experienced a lot of this.
Good luck

Been trading for 10 yrs . And still have a problem with greed. If i make $500 yesterday and i only make $300 i consider that not good. I have a great trade plan but the rest is all mental .

TWDsje 

Of course, there are still things that robots are not good at. Being able to interpret news and how that could affect future perceptions of fundamentals or perceptions about future order flows is something machine learning science hasn't figured out very well yet. That's why I say that having some sort of informational edge is a critical factor. However, it is likely that we will continue to see such strategies grow, and it will be a lot easier to compete if you understand the science behind it.

Being able to interpret news: humans are very bad at this task, otherwise russian propaganda would never have existed, at least in Europe (in Italy millions of people think the war is staged).

Anyway...

QUestion: What else is required aside from market knowledge, money management, and emotional discipline?

Answer: Luck.

I think even guys like Michael Burry have been very lucky in their speculations, the successful ones occurred before the disastrous ones (e.g. the big short on Tesla).