Is Trading Just Guessing?

Quote from ric3bowl:

The only investing going on in the markets is from the activities of disciplined, long-only value investors. Most other "investing" going on in the markets is speculation. Not making a judgement call on speculation, but it's not investing.

But that's just semantics. For speculators, the point they become successful is probably when they have fleshed out their edge and have positive expectancy. That's when the "gambling" becomes "professional." But a speculative trade is never investing.
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Of course you are right.

BUT,

i consider my self also as an investor. I buy and sell goods to make money, therefore i am an investor, because i invest in something to make profit. Thats simple.

Also the stupid normal fool, who buys stocks for holding them for ever, and believes everything the banks told him, is true. and that his stocks must rise to the sky, just because he bought it, => is also an investor, bcuz he makes the deal to make profit.

I am an short term speculator investor.
Every investor/trader is a speculator !!! Dosnt matter if your name is Warren Buffett, George Soros, Richard Dennis, or HATEtheRisk...

We are puting our money into goods, to make profit with it: That is investing !!! The timepoint when you want to take the cash, makes no difference it that. it is still investing and speculating on the future.....:p
 
Quote from macattack:

Isn’t the decision to enter a trade nothing more than a guess?
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You sound like Ronald Reagan: "Isn't a scientific theory just a guess?"

No. I know there's a very foolish and frankly destructive movement long afoot to treat all opinions the same but the fact is, always has been and always will be that there is a chasm the size of the Grand Canyon between informed opinions and uninformed opinions.

So it is with trading. If you think trading is just guessing, get out now. Trading isn't for everybody and clearly it's not for you. There are people on this website who have posted that no matter how thorough your price analysis, your entry into a trade is never better than 50-50. These people are not traders.

To anyone who thinks trading is just guessing, do yourself a favor and quit now.
 
Quote from J.Joseph:

Sure it's guessing. But that's where money management comes into the picture. If you roll a dice and 1,2,3,4, or 5 are winners but 6 is a loser, would you be "guessing" that it would not land on a 6? Absolutely. But it's a good highly probable guess. No matter how many times it does NOT land on 6, though, eventually it will. And in the course of a million rolls of the dice I don't have to guess that it will hit 6 approximately 1 in 6 times. It's when you reduce the game to one specific roll of the die that it becomes guessing. If I bet 100% of my account on each roll of the dice I'll win 5 times out of 6 but when that one loser comes it'll wipe me out. So the question is not "is it guessing or is it knowing," the question is "how much should I put down on this guess?" And for 5/6 odds, the answer has to be less than 100% or that one loser will wipe you out. In fact, for 5/6 odds, the chances of hitting 6 twice in a row is only 1/36. So betting 50% is also too much.
For long term survival in such a game, take the odds of losing x number of times in a row and match it up against the number of trades you plan on doing in your career. If you do 100 trades per year with a career of 10 years, that's 1000 trades. And with 5/6 odds, you have a 1/1296 chance of losing 4 times in a row and being wiped out. So, betting 25% per roll is still too much.
Money management is where it's at. It's not about being right all the time, just about having a winning plan.
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Nice planning, but the Law of large numbers overrules everything. i.e. In a large sample size, unknown no. of consecutive losses is possible for whatever probability, so you can't
say a dice is loaded no matter what odds because large can mean infinity.Statistics is not your friend.
 
Trading can be gambling to the extent that you are prepared to make decisions about where the trade might go, but what makes them really significantly different is the more obvious point that trading or investing carries positive expectancy or is generally believed to. Gambling has negative expectancy and depending on how well trained you are and how much research you've done and how well you've done your research and what your research says about your win percentages, sharpe, and correlation you should no doubt be able to produce profits when making rational investing decisions given the amount of information you've gathered and the time you've taken to analyze it as well as how much information you have.
 
Guessing is not a great choice when you try to describe trading. A trade does not consist of an entry only. Are you guessing if and when you enter, guessing again if you move your stop to breakeven, and guessing again if you don't increase your target and let the trade hit your target (ie. you don't do anything)?
Entry, trade management, money management: are these guesses that put together equal one bigger guess, or a series of guesses?
The point is all of this is superfluous; it doesn't matter. What really happens is that you have a theory that you use to trade your market. And the market is a complex system whose moving parts you cannot calculate completely. Most of scientific thought is guesswork. It doesn't matter.
If you break trading down to it's prerequiste parts, then you have a few aspects of trading that are in your control, and many aspects that are out of your control.
 
Yes, guessing is a winning strategy, which is why I can't understand why some rarefied day traders (not freshman investors who are learning) seem to consistently loose money for weeks on end.

Follow the ES Journal thread, follow the direction of the wealth of real time information in the trading desk chatter, and guess the direction. Have very tight stop losses, and let the correct guesses run more than the stop. Be more inclined to cover a short than selling a long on bull days, and vice versa.
 
Quote from kut2k2:

You sound like Ronald Reagan: "Isn't a scientific theory just a guess?"
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I like that Reagan quote. Not because it's right, but because trading is so much like the scientific method.
I think trading is more related to a hypothesis than a guess. It's like saying, "Based on how I understand things at this point, I think ______." People form hypotheses because they have "reason to believe" in something. Not because an idea came out of their butt. Same in trading. You have reason to believe something. Then you test the hypothesis by opening a long or short position.
As with science, though, there has to be a definitive place where you can say, "Nope, my hypothesis was wrong." And stop letting it eat up your resources. If only 6 of 10 hypotheses are right, I'd better know pretty quick that the wrong ones are wrong and do something about it or I'll wash out. Even if 9 of 10 hypotheses are right, a failure to recognize and terminate the wrong one will lead to a major setback or significantly stunt one's account growth. Like Alexander Elder says, "Manage your losses. The winners will take care of themselves."
 
There is guessing (coin will end on top) and there is educated guessing (Knox is most likely innocent).

The difference is the available info at hand. A guess is just trying to figure out a random outcome. An educated guess is weighting information and making a logical decision/statement based on that.

Trading should be educated guessing, when there is an edge based on previous price action, information on the firm,etc. Unfortunately several times it is just a pain old guess....
 
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