Skip to content Skip to footer

Luck, Skill, OR a Bit of Both

Many people believe that success in the financial markets is all about being lucky and that there is very little skill involved. Many studies have been performed on this specific topic and plenty of traders have been interviewed to get their take on this topic.
Is success in the market based on steadfast research and skill? Lucky hunches? Or… is there some truth to both sides of the argument?

Luck and the “Hunch”

Traders have been known to have incredible instincts when it comes to the movement of the market. Some people believe that these traders are just lucky and tend to make the right choice at the right time, with no real skill involved.
So, what is this mythical “hunch” that traders have and is it simply luck? One neuroscientist believes that the hunch is actually a biological process. Dr. John Coates wrote in his book, “The Hour between Dog and Wolf: How Risk Taking Transforms Us, Body and Mind”, that hunches are somatic markers that have been imprinted in the brain based on past successful trades. He suggests that the brain and body remember the conditions that preclude a successful trade and when those conditions are present again, the brain and body signal the person that the conditions have been successful in the past, which triggers the “hunch” that some traders claim to have experienced.
This theory is one of many that researchers have investigated to understand the key to successful trades that result in profitable traders. Some people still believe that the trader is simply lucky and it has nothing to do with biology, or skill, and that the being profitable in the market is simply a 50/50 lucky guess.

Killer Skills

Most traders that I have come to know over the years dismiss the luck hypothesis as being the rantings of unsuccessful traders. They believe the countless hours that they have spent studying the “ups and downs” of the market have provided them with the skill and knowledge to predict market movement.
The saying goes that, “History always repeats itself”, and that is the foundation of many trader’s research. There are several factors that play into the “historical” data that is used to predict the markets. Deciphering this data and applying it to current conditions is believed to be a skill that is learned and honed by years of experience.
Most experienced traders will tell you that they have spent most of their adult lives studying the market and that the success of every trade is based on countless hours of research.

A Fine Balance

While I find Dr. Coates research fascinating, I still tend to lean towards the skill over luck argument. The complexity of market movements and all the factors that play into a successful trade make it difficult to believe that success is purely based on luck.
Traders may have had a few lucky trades that have been profitable, but a trader who has had consistent success in the market has done so through acquiring specific market knowledge. By studying the history, movement, political and socioeconomic conditions, successful traders have honed their skills and built a base of knowledge that gives them the ability to make knowledge-based decisions on which trades are going to be successful.

Sharpen your trading skills today by visiting the Tradeview website and exploring our informational blog, The Rhino Report. Our blog provides educational articles and videos that will expand your knowledge within the trading industry. When you’re ready to explore financial markets, Tradeview provides live free demo accounts where you can trade in real time and learn how to analyze the markets using technical indicators without risking your money.
If you still have questions, reach out to your Account Manager or our Live Chat support at any time to find out more.

Andrea Lafleche
Account Manager

Show CommentsClose Comments

Leave a comment

Tradeview Ltd. is not a portfolio manager or an investment advisor. This Market Report is for informational purposes only. Any statements made or opinions voiced in this Market Report do not constitute investment advice. The Tradeview Ltd. Market Report does not constitute a solicitation to buy or sell in the financial markets. Although the information contained in the Market Report comes from trusted sources, Tradeview Ltd. is not responsible for guaranteeing the accuracy, timeliness, completeness, or fitness of such sources. Tradeview Ltd. shall not be responsible for and disclaims all liability for any losses which may be suffered from access and use of the contents of the Tradeview Ltd. Market Report. Trading any financial instrument on margin, using leverage or otherwise involves considerable risk. Therefore, before deciding to participate in any style of trading, you should carefully consider your investment objectives, level of experience and risk appetite. Most importantly, do not invest money you cannot afford to lose. Consulting with your investment counselor, attorney, accountant or other professional upon whom you rely for guidance as to the appropriateness of an investment in any style of trading is recommended.

Tradeview Ltd.

Is licensed to carry on securities investment business and is regulated by the Cayman Islands Monetary Authority (CIMA) as a full securities broker-dealer. Tradeview conducts business pursuant to the Cayman Islands Securities Investment Business Law (SIBL) and its activities fall under the direct supervision of the Investments and Securities Division of CIMA.
Headquarters: 5th Floor Anderson Square, 64 Shedden Road, Georgetown, Grand Cayman, Cayman Islands KY1-1002, BWI.

Tradeview Asia Ltd.

Is licensed and regulated by the Labuan Financial Services Authority (FSA) as a Money Broker, registration number LL15870 licensed to facilitate transactions in foreign exchange pursuant to Labuan Financial Services and Securities Act 2010, the Labuan Companies Act 1990 and the Labuan Business Activity Tax Act 1990.
Headquarters: International Business Financial Centre at Office 5, Jamie Business Center I, Unit F10, First Floor, Paragon Labuan, Jalan Mustapha, 87000 Labuan F.T.

Tradeview Europe Ltd.

Is licensed as a Category 2 Investment Service Company and is regulated by the Malta Financial Services Authority (MFSA). The Malta Financial Services Authority (MFSA) is the single regulator for financial services in Malta. MFSA is a fully autonomous public institution and reports to Parliament on an annual basis. The MFSA is a member of the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the International Organization of Securities Commissions (IOSCO) and is a signatory of the Multilateral Memorandum of Understanding with other European regulatory Institutions. Tradeview is authorized to provide financial services across multiple asset classes and is passported in the EU/EEA under MiFID II (EU Markets in Financial Instruments Directive).
Headquarters: 157 Archbishops Street, Valletta VLT Malta 1440.

Tradeview Financial Markets S.A.C Global

Is authorized to conduct business pursuant to and in compliance with the General Law of Companies (LGS) promulgated by the government of Peru. Tradeview Financial Markets S.A.C is registered with the National Superintendence of Public Registries (SUNARP), company number 13089531. Tradeview Financial Markets S.A.C provides financial services in selected OTC derivative markets in compliance with all applicable government regulations.
Headquarters: Los Mirtos 239 Urb. San Eugenio, Lince, Lima, Perú.