The Luck of the Trade: How to survive Market March Madness
The Luck of the Trade: How to survive Market March Madness
Written by Katie Gomez
With St. Patrick’s day approaching, luck is becoming a buzzword. Dissecting the semantics behind what luck means is more challenging than one might think, given that many have differing views on the word’s origin. Most people view luck with an all-or-nothing mindset, labeling themselves as lucky or unlucky people as if our luckiness is predetermined at birth and nothing we do can change it. However, while other forces may be at work regarding an individual’s luck, we can learn to make our own luck. Allowing external forces such as luck to drive your life can lead to a miserable or fulfilling life; it all depends on your mindset and response to life’s events.
Luck is especially prevalent in trading, given that the market fluctuates so often. Luck is something we tend to rely on, whether that looks like attributing our successes to good luck or blaming our failures on bad luck. For someone who deals with the market, luck can be a combination of timing and a consistently positive attitude. Luck is not the only thing that makes a successful trader, but it may have more impact than we thought. Most traders underestimate the role of luck in their trading, especially when it is good luck. We are much more willing to attribute good results to skill and bad results to luck. But luck cuts both ways, and we can focus on the good luck we receive or the bad luck that condemns us.
Depore (2021) presents a good analogy regarding luck in poker to luck in the market. In poker, you can execute perfect strategy and still end up a loser due to the way the cards may fall. However, you can also play a hand like a complete idiot and still win if Lady Luck is on your side. Luck is an inherent part of the stock market nature and any other enterprise that deals with uncertain future outcomes. Unfortunately, putting all your faith into your skill and hard work might still lead to disappointing results, as luck remains the invisible and underestimated portion of success. That said, you must recognize and find a way to manage luck in investing.
How to deal with luck as a trader
1.) Don’t underestimate the prevalence of luck.
For every trade, ensure you consider the risk you leave for luck. Risk is always out there; there is no way to eliminate it.
2.) Expect good luck, and good fortune will follow.
Once you realize the prevalence of luck, you have to create a mindset of a generally lucky person. You may have recently seen social media creators presenting the idea of “lucky syndrome,” where people believe that they are the luckiest person they know through the power of daily affirmations, conscious reactions to events, and the practice of daily reflection. Investors and traders alike would benefit from embodying this mindset with their trades. It might sound eccentric, but affirming your luck before entering the market creates a positive signal or intention for your brain to focus on throughout your day.
Of course, the best time to do this is upon waking because your mind is already in a theta brain wave state, prepped and ready to absorb whatever information you feed it. Although things will not always go how you want, keeping a positive mindset and considering yourself a generally lucky person can do more good than harm.
3.) Expect the best, and prepare for the worst.
Although staying positive in believing luck is on your side is essential, you should secure your trades to survive streaks of bad luck. For instance, diversification is one of the best tactics to protect your investments, spreading your investments across the board. That way, when one piece (investment) falls, it doesn’t take down the whole board (portfolio). Therefore, it is essential to use various forms of diversification to ensure that a run of bad luck doesn’t wipe you out. The more padding you have in your portfolio, the less your investments will get hurt when bad luck strikes.
4.) Money management = luck management.
Find a methodology that limits the collateral damage of bad luck, so you can better compound the benefit of good luck. This requires consistency, vigilance, hard work, and good strategies and tactics. When the amount of luck needed to profit from a trade is large, it can become a liability.
At this point, you should separate the luck component of trading and focus on the elements of your thinking that will have the most actual impact on the results, such as timing, stop levels, news events, etc. Focusing on the results without dissecting how luck played a part in each trade leaves you unable to understand the quality of your trading process (Deppore, 2021). Relying solely on skill can be just as detrimental as relying only on luck. Success requires work and effort constantly, but it also requires you to keep the faith, trust the process, and embrace the potential luck you might experience daily.
In conclusion, whether good or bad, luck will always be a companion to traders and other market players. The sooner you embrace its prevalence and understand its role, the better your chances of producing superior returns. Once you enter the mindset of a lucky, confident, positive person, when that lucrative reward arrives and you have succeeded in your goals, you are ready to match that energy with everything in life; it is essential to have balance. If you want to find the pot of gold at the end of this rainbow, believing in luck is a prerequisite.
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