Luck vs. Skill

How many trades and over how long a period of time will answer the question:

Was it luck or “skill” ????

 

With time and a dose of humility a person can easily recognize the difference between luck and skill.

 

I use this formula:

Skill = sqrt(numberOfTrades) * (averageProfitPerTrade / standardDeviationOfAllTrades)

 

That's easy.

If you win, it was skill.

If you lose, it definitely was luck [bad],

 

Luck comes & goes...periodic at best.

Skill?......Well, skill can last a lifetime as long as ego is absent.

 

It's all skill...unless you make your trades by flipping a coin. If you consistently lose money or blow up, skill is lacking, vice versa. Personally, I think a trader who manages not to wipe himself out with a few trades has much more skill than a trader you makes a few big homeruns but then blows up. PnL is not measure of skill.

 

I'd rather be lucky than good.

 

I got extremely lucky during college in a handful of picks and made more money than I had ever seen. I proceeded to loose 80% of it in LEH, WM and FRE among others. So I know that you can get lucky and in a big way. However I don't think you can figure out it is luck while it is happening.

Now I am clawing my way back. Funny how you learn something and see the exact mistake you made in the past.

 

luck won't let you stay in this business for a long time.