MarketLife Ep 39 – What’s Luck Got to Do with It?

I received a great question from Jason:

Mr Grimes, I need to ask you something. I have been watching your videos and I’m a little confused about one thing. On one of your examples, you showed a diagram of a collection of people making I believe 250 trades with a wining process. The diagram showed that a certain amount of people still lost money and you made a comment that winning and losing was random, even with a successful process. This information really made me take a week off to think “Do I really want to do this with my life?”.  I know the market is unpredictable but even with a process, risk management, and slight odds in my favor — I could still lose all my money even after 5 years of trading small like you recommend? Are you saying that winning and making money is completely random?  Thank you for clarifying this.

This is a great question that every trader will grapple with, more than once, at some point in his career. I hope my answers in the podcast are entertaining and useful!

I also want to link to a few resources that will help you dig deeper.

Michael Mauboussin’s book The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing should be on your reading list.

I also wrote a two blogs, here and here, that will give you a slightly different perspective. In particular, the second post has some ideas for managing your reactions to luck and for accepting the impact of luck in a constructive way into your trading process.

If you enjoy the podcast, one of the very best things you can do for me is to leave me a review on iTunes here. Also, if you like the music for this podcast, then be sure to check out Brian Ashley Jones, my friend, and a fantastic singer-songwriter.

Enjoy the show:


Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.