Traders typically view the effectiveness of their efforts by how much money they make or lose. That is the scorecard that is used for obviously reasons, but it is the wrong focus.
Most people won't admit it, but luck plays a major role in how much money we make. No matter how smart or hardworking we are, we will have bad luck and good luck. Some days the gods will smile upon us, and on other days karma seems to be plotting against us.
If we focus on nothing but the bottom line, we may be incorrectly led to believe that short-term results are indicative of our overall skill. Rather than judge trading by outcome, we should judge it by whether we applied a rigorous and consistent approach.
If we develop a trading approach that manages risk, cuts losses and helps us to optimize gains, it will pay off over time. The important thing to recognize is that no trading system infallible. You will have losses. In fact, you may experience long periods of time when nothing seems to work correctly. That is the nature of speculation. If you are convinced that your process is a solid one then you should intensify your focus on making sure you are applying consistency and with rigor.
The big danger in trading is that you are using a flawed process. Perhaps your stock selection is the issue or maybe you don't give positions enough room to develop. There are always things you can tinker with as you grow and develop as a trader. Don't let your bad luck or good luck color your objectivity about your process.
It is important to be cognizant of how much luck can impact us. There is no way to avoid it so we need to manage it. We manage it by having a process that seeks to limit the damage it does but maximizes our returns when it favors us.
The potential for unlucky outcomes can cause unreasonable fear. Traders who fear that disaster is lurking are ineffective trading. If you focus on your trading process instead of the potential outcome, you can act more aggressively. The more you worry about the outcome, the more flawed your trading is likely to be.
To achieve the best results, put all your efforts into the process you are employing. There is no guarantee that the outcomes in the short term will be positive, but if you address the flaws in your trading system and stay disciplined and focused you will enjoy long-term success.
We will always place great emphasis on how much money we are making, but we need to be even more mindful of the process that produces those results. Don't confuse luck with skill.