Luck in Trading the Markets

Financial markets are unpredictable beasts, with the potential to make and break fortunes every day. For the most part, those engaged in trading the markets through financial spread betting or any other channel do their level best to ensure that they research the best positions. But while this degree of effort is commendable, and indeed encouraged for anyone looking to make a success of trading their capital in financial markets, how reliant is it on luck? Furthermore, can traders really engineer positions and markets in a way that removes the naturally unpredictable element of chance from the equation?

Who Needs Luck Anyway?

Luck undoubtedly plays a part in trading the markets. As the expression goes, you can lead a horse to water, but you can't make it drink - in other words, you can research and strategies and analyse and decide until the cows come home, but it's ultimately the markets that decide your fate. This is an unavoidable element of trading, so it is up to the individual traders to structure his account in such a way as to minimise the impact of 'bad breaks' and to stack the odds more heavily in favour of generating a return.

In practicality, while the component of chance accounts for a small percentage of trading success or otherwise, it is the preparation that goes in to finding out about the markets and deciding on how best to trade positions that contributes most successfully, swaying the balance in favour of skill over good fortune.

Luck vs Skill in Spread Betting

Most successful traders inherently know the difference between luck and skill, and can say with confidence that their trading abilities and expertise outrun the markets and chance in enough significant to make a profit, but how can less experienced traders be sure they're operating skilfully and not trading on a whim?

The difference lies in intent and hard work. Those that choose to rely on luck usually do so out of a lack of a strategy, or a poor understanding of trading theory, which ultimately translates into a very short trading career. Instead, the focus should be on developing the analytical and interpretation skills necessary to conduct research into the markets and establish viable, potentially profitable positions as a result. Only by forgoing luck and taking a more measured, reasoned approach to trading the markets can traders hope to build a sustainable portfolio for the long-term.

Everyone needs a bit of luck - whether it's to trade the markets or to cross the road safely. But some people rely on luck more than others, and while chance can't be entirely eliminated traders should take active steps to move towards more knowledge, better-informed decisions and more competent trading. By seizing control of the portfolio and finding opportunities for profit, traders can rely less on luck and more on their own expertise, effort and ingenuity - far more likely the winning combination.