How to Tell Luck From Skill in Your Own Trading

I’ve watched a lot of traders have a great few weeks. Then I’ve watched what happens next.

Some carry on. Many hand it all back, and they’re always surprised. They weren’t reckless people. They simply believed that a good run meant they’d cracked it.

I suppose the uncomfortable truth is that the market will let almost anyone be right for a while. If a thousand people each flip a coin ten times, around one of them will get ten heads in a row. That person isn’t a genius, and they don’t have an edge. They were one of the thousand. 

Trading works the same way, except you’re the one flipping, and it’s much harder to be honest about it.

So how do you tell the difference? Here’s the test I’d run on any run of results.

1. Count your trades

A handful of trades tells you almost nothing. Ten winners in a row might be skill, or it might be a favourable week. As a rough rule of thumb, you need a large sample of the same setup, executed the same way, before the numbers start to mean anything. A hundred is awesome. Anything less than 30 is irrelevant. The more the better.

If you’ve taken twenty trades, you don’t know yet. That isn’t pessimism, it’s just maths.

2. Check whether one trade carried the month

Take your best trade out of the results. Does the month still look good?

If a single big winner is covering a pile of mediocre trades, that’s worth knowing. Skill tends to look boring and spread out. Luck tends to look like one huge moment.

3. Ask whether you can explain every winner

For each profitable trade, could you say why you took it, what you expected, and why it worked? “It just went up” doesn’t count.

If you can’t explain it, you can’t repeat it. And if you can’t repeat it, it wasn’t a process. Weekly with all my clients we dive into trades good and bad… the good ones tell us as much as the bad ones. If any of you have a mentor out there and he isn’t calling you out on trades, he’s not helping. 

4. Look at whether you followed your plan on the winners

This is the one most people skip. A trade where you broke your rules and got away with it is still a bad trade. It just got paid. BAd trades can make money as much as good ones can lose. Fact.

If your journal includes winners where you moved your stop, doubled your size or chased an entry, those aren’t evidence of skill. They’re evidence that you got lucky, and that you’ll probably do it again.

5. Do the expectancy maths

This one takes five minutes, and it’s the most honest number in trading.

Expectancy = (win rate × average winner) − (loss rate × average loser)

If the result is positive over a decent sample, you have something. If it’s close to zero, or negative, your good week was noise. Most traders have never calculated it, which tells you something in itself.

6. Judge the decision, not the outcome

Imagine a simple grid. A good decision can lose, and a bad decision can win. Over time, only good decisions pay. So score your trades on whether you followed your process, not on whether they made money.

A losing trade that followed your plan is fine. A winning trade that broke it is a warning.

What to do with this

None of this is meant to take the shine off a good run. Enjoy it. But treat it as a hypothesis to test, not a conclusion.

If you do keep stats, you’ll know within a few weeks whether your edge is real. If you don’t, you’re guessing, and the market is very good at taking advantage of people who guess.

The good news is that this is fixable. It takes honesty, a bit of structure, and sometimes a second pair of eyes on your numbers.

If you’d like that, I’m offering a free 15-minute call to go through how you trade and where you can improve. Email coach@gtdmentorship.com and I’ll send you the booking link.

Dan Goldberg, Goldberg Trader Development & Mentorship