Friday, April 08, 2011
One of my favorite quotes that I share on my Tao of Simplicity blog is:
A zen master was once quoted:
Enlightenment is an accident, but some activities make you accident prone.
Yesterday, I read a blog post by trader Rob Michell, who said something similar about winning trades:
"It is impossible to distinguish between luck and skill in most cases."
"Having said that, here is another tidbit of crazy inside knowledge. Since you cannot distinguish between luck and skill a good portion of the time, the real truth of the matter is you are not responsible for your winning at all. The market is."
"I said before, you have to manage your risk and then, at some point (and here is the blaspemous statement that will make most traders cringe), a good accident happens. Accident you say?? Yes. I use that word, because it is the only one that is strong enough to remind me there is nothing personal about trading. It is all management of risk. It is a disipline."
I really like this fresh way of saying a trading truth, which is that the market goes where it goes, and nobody can predict it 100%. No strategy or model can always pick the best times to buy and sell.
We have to think like a casino. We want to take bets where we have an edge. On any individual trade, it is an accident if we make a profit. But, if we have a trading system with an edge, it won't be an accident if we profit over time.