Is making money in the crypto and stock markets based on skill or luck? Never mistake luck for skill!

In the stock market, we often observe a peculiar phenomenon: novice investors tend to make money when buying and selling their first stock.

This is the so-called “rookie luck.”

Many “stock market newbies” also feel a sense of “who else but me” after their first successful “test of the waters,”

as if the stock market will become their ATM,

or even help them achieve their “small goals” in life through investing.

In fact,

many times,

“rookie luck” is just luck! Making money is merely accidental,

not inevitable.

I believe everyone learned the fable “Waiting by the Tree for the Rabbit” when they were young.

Original text: "There was a farmer in Song.

In his field, there was a tree,

a rabbit ran and hit the tree,

broke its neck and died.

He then released his plow and waited by the tree,

hoping to catch another rabbit.

But rabbits cannot be caught twice,

and he was laughed at by the people of Song."

Waiting by the Tree for the Rabbit

The story is simple,

but its underlying meaning offers many warnings.

The farmer took a fortunate event— a rabbit hitting a tree,

and regarded it as a normal occurrence— waiting every day for a rabbit to hit the tree again.

Where in the world is such a no-effort windfall!

Be cautious of falling into psychological traps similar to “rookie luck” when investing in stocks.

There is a term called “self-attribution bias”: when successful,

blame everything on one’s ability; when failing,

blame others or objective reasons.

For example, many stock traders,

once they make money,

become ecstatic,

thinking they are chosen by heaven,

a once-in-a-lifetime stock god; once they lose money,

they cry and complain,

blaming bad luck,

or that they didn’t burn incense and pray yesterday.

In stock investing,

mistaking luck for skill,

such psychological bias can easily lead to dangerous consequences.

Relying on luck to trade stocks,

at most, you can earn short-term gains,

but in the long run,

luck is unreliable,

meaning,

if you rely on luck to make short-term profits,

long-term wealth requires skill and expertise.

Many people earn a fortune in the stock market in just a few years,

thinking it’s due to their superior ability.

In fact, sometimes,

it’s just that good times gave you good returns! When the good times end,

many who previously made huge profits simply give the money back to the market.

Life is unpredictable,

K-lines fluctuate.

Investing is a battlefield where you can’t hear the gunfire,

and a martial arts world where you can’t see the sword light.

Invest with the caution of walking on thin ice,

always maintain reverence for the market,

and believe in the principle that “one misstep can lead to total loss.”

So, earning five times in a year is easy,

but doubling in three years is difficult.

As long as you stay in the market,

the stock market is about who can survive longer!

The essence of investing is actually the realization of cognition,

profit is just the result,

and cognition is fundamental.

Every penny you earn

is a manifestation of your understanding of the world.

Every penny you lose

reflects a flaw in your understanding of the world.

The famous 20th-century Russian-American philosopher Ayn Rand once said: “Wealth is a product of a person’s thinking ability.”

Russian-American philosopher Ayn Rand

Everyone’s perspective on the world varies greatly,

and their understanding of the same investment opportunity differs,

different levels of understanding mean completely different success rates,

ultimately leading to different outcomes.

What is poison to you,

may be honey to others,

it’s also about cognition,

what you consider worthless,

may be a treasure in someone else’s eyes.

For example,

now everyone praises Moutai,

but few who have held it since its listing and gained dozens of times returns,

have actually succeeded.

Some chose to exit midway,

most even gave up entirely.

It’s hard for people to earn money beyond their understanding.

If you lack the correct understanding of investment principles,

the constant changes and invariants of the investment world,

the knowledge of your investment targets,

and your own risk tolerance,

relying solely on intuition to trade stocks,

trying to earn money from what you don’t understand,

this is not investing,

it’s gambling.

For investors,

it’s important to learn to distinguish whether profits come from luck or skill.

Money earned through luck will eventually be lost due to “skill.”

For example, seasoned traders,

know little about many pharmaceutical companies,

if I previously lucked out and made money on Hengrui Medicine,

it only shows good luck.

Because I generally don’t understand Hengrui’s R&D pipeline.

This is within my cognitive scope,

my personal understanding doesn’t cover these areas.

To change the current situation,

to improve understanding,

you must learn.

If a person’s cognition is at the bottom of society,

and they are not good at learning,

unwilling to learn,

and have little experience,

the hope of social mobility is very slim.

Only by breaking through cognitive limitations,

continuously updating and deepening understanding,

can one stand invincible,

and it’s also the best way to reverse life’s fortunes.

The greatest fairness in this world is:

when a person’s cognition is insufficient to manage their wealth,

society has 100 ways to harvest him.

Until your wealth matches your cognition.

Remember,

do not mistake luck for skill!

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