Personally, I think the term "Beginner's Luck" is inaccurate. It suggests that the positive results that some traders achieve as soon as they begin their trading journey is some how a fluke, that, by chance, the market has just happened to give them an easy time. After all, newer traders know alot less about technical anaylsis than the more experienced trader...how else can they achieve such success?
More appropriate terms for this common occurrence might be "Beginner's Belief", "Beginner's Spirit" or maybe "Beginner's Ignorance".
Fresh out of the seminar/course or any other serious introduction to trading, the eager student follows the rules and reaps the benefits of successful trading. This is, of course, assuming they have the discipline to learn and follow the rules they've been taught.(let's also assume the rules/methodology stack the odds in your favour) What they've been taught isn't magic...it's just a way to identify an edge and use it. The irony is, the edge usually isn't anything special...it seems so effective because the trader hasn't experienced anything to instill doubt or knock confidence...yet!
When they do eventually bump into that excruciating, but completely normal, losing streak, their future as a trader will be determined by how they deal with it. If a trader starts looking for ways to improve their understanding of TA to try to prevent further losing streaks (exactly what I did some 20 months ago) their in for a long, painful journey. If one can recognise that the application of the skill of TA in a consistent and objective manner, regardless of what's happened recently or what one feels is going to happen, is far more important than the potency of the edge, they just might make it...
Jules highlights the value of spirit in a recent post....I know from personal experience that a faulty trading mindset will trash the highest probability edges and quickly turn what would be a nice modest earner into a way to slowly drain money from your account. Spirit is our most valuable resource for sure....
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3 comments:
A couple of quick observations (I'm on holiday but it is monsoon season in the UK)...
1. There is inherent bias in the concept of 'Beginner's Luck'. Beginners who are lucky say they have it, beginners who are unlucky say...nothing.
2. I know I sound like a stuck record (mp3, whatever!) but the issue you describe is another good reason to collect lots of data. If you can quantify that what is happening *is* just a run of bad luck then it is a lot easier for the head and heart to deal with.
Warm beer beckons.. ;-) ..
lol@mp3...I agree on both points.
Except "lots of data" is arbitrary and will never be "enough data"....
An example is collecting 11 months of data, using ideas such as standard deviation (even though I can't remember the formula from school!) to help me determine what is normal behaviour and what isn't, only to suffer a losing streak which causes alarm based on the 11 months of data, but is perfectly normal on a larger timeframe!
Of course, it will still help for the smaller deviations covered by the sample size...
Reminds me of this quote from Fight Club: "On a long enough timeline, the survival rate for everyone drops to zero."
P.S Success leaves clues. You repeating the data thing must mean it was/is an important part of your success. So I'm listening and trying to be less ridgid in my own views :)
"Agreed but..." (which is my new catch-phrase!),
1. It's true that there is never enough data, which is why you can only approach this (says he working in another of his boring, repetitive themes..!..) probabalistically. The stats will only ever give you percentages (e.g. 95% confidence limit etc).
2. It's a gross oversimplification but think about an index future strategy that only ever produced short signals. The person would have made a fortune through 08 but then consistently lost money from spring this year.
If you understand the 'price features' that your strategy depends on then you have some hope (although only some) of recognising when the market has changed and to stop banging your head against the wall.
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