Is Trading Just Guessing?

[oldtime]

Quote from J Ski:

Buying stock is not gambling like betting on a horse.
$100 bet on "glue factory" and he loses. $100 lost.
$100 bet on stock, stock goes down a little you close out
the trade, you have some of the money left.

it's more like betting on who and how much are they gonna bet on which horse.

 

[Zr1Trader]

Working with probability , yeah it's guessing but you can still check your odds if you keep the right kind of stats.

 

[ElCubano]

Quote from lwlee:

Everything in life can be assigned a probability. The better the probability, the less, it's a "guess".

Can an ever changing target be assigned a probability on a consistent basis?

 

[Lights]

yes. trading is pretty much guessing. every trade can be right and wrong many times before closing a position.

Quote from macattack:

Isn’t the decision to enter a trade nothing more than a guess?

Guess: To predict (a result or an event) without sufficient information.

No matter if you’re using an automated fancy system, 10 monitors, your gut, the moon, technical analysis, fundamental analysis, breakouts, support/resistance, Fibonacci levels,
trendlines, Bollinger bands, oscillators, the moon………….everybody is just guessing aren’t they?

Some genius from MIT can spend 10 years developing some extremely complex system at a cost of a million dollars, & it would still probably do no better than some guy with a high school diploma who Has 20 years of experience & the ability to make calm, logical “guesses”.

It reminds me of sports betting. Even the sportscasters on tv who should know way more than anyone else can’t even predict half the games right each week. You would think they could, but like the markets, there are so many variables you just don’t know.

It seems like the keys in trading have more to do with experience, risk control, bet size, having a strong mind, etc. As far as entering a trade everyone, from the little guy to the
multi-million dollar corporation, seem to have about the same winning %’s when successful……….because for everybody it’s the same……….it’s just a Guess !

 

[lwlee]

Daytraders, particularly scalpers, constantly do it. It's second nature, almost an intuition when you've done hundreds of time

Quote from ElCubano:

Can an ever changing target be assigned a probability on a consistent basis?

 

[dealmaker]

If you are guessing you are CREATING RISK, whereas a trader doing high probability trades is ASSUMING RISK, so you see there is a substantial difference.

 

[N54_Fan]

Quote from lwlee:

The key words are "without sufficient information".

Guy with insider information, buying a bunch of options. Is that a guess?

Trader with proven backtesting results. Is that a guess?

Everything in life can be assigned a probability. The better the probability, the less, it's a "guess".

- betting on keno, probability of loss is very high.
- betting on black or red in roulette, probability of loss is about 50/50.
- betting on NYC real estate in 1995, probability of loss was prob less 50%.
- betting on a newborn dying tomorrow, probability of loss less than 1%.

In each case, if I had sufficient information, my probability of success increases dramatically.

So is trading a guess? For clueless people, yes. For proven traders, no.

THIS says it exactly!!

If you look at markets prices there are certain spots when certain price patterns are evidence of TYPICAL moves that are to occur next...NOT always but higher chances of something occuring. These price patterns as noted in technical analysis DO amount to a guess,...BUT AN EDUCATED HIGHER PROBABILITY guess. When these are properly identified then that is where the edge originates. Then proper money management keeps and expands upon that edge. If your setup is wrong you lose a little. If right you stay with it until it is no longer right... and hopefully make more than your losers.

 

[syswizard]

In each case, if I had sufficient information, my probability of success increases dramatically.
So is trading a guess? For clueless people, yes. For proven traders, no.

Perfect. Ask John Paulson who did a lot of homework before going "all in" before the subprime debacle became front-page material.
That's the key....anticipation.
That being said, PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Paulson has now made a bad bet.
http://www.businessweek.com/magazine/has-john-paulson-lost-his-touch-09152011.html

 

[intradaybill]

Quote from aromata:

Spot on. Nobody knows the future so there is always an element of guess involved.

I like the dogmatic way some people present their own views. How do you know there aren't people who experience precognition, consistently? Maybe there are.

 

[lwlee]

Yeah sure, people also see ghosts all the time. They have documented it on TV, Ghost Hunters. Believe it, it's on TV.

Quote from intradaybill:

I like the dogmatic way some people present their own views. How do you know there aren't people who experience precognition, consistently? Maybe there are.