Is Trading an Art or a Science ? : Well, Definitely Not an Art

There are various forum discussions on forex websites that talk about the classification of the trading discipline within a given field. Several people classify trading as being an “art” -implying that it requires certain subjective qualities for success- while others say it is a “science” as it requires a lot of analysis and knowledge in mathematics, programming and statistics to succeed. I believe that most of these individuals who attempt to classify trading do not understand very well the actual definition of either art or science and for this reason the classification of the trading field seems to be elusive and particularly debatable. On today’s post I will be talking to you about my opinion on this subject, the definition of both art and science and where I believe trading should fall. I will tell you why I believe trading is not and art and why it cannot be called a pure science.

The first thing we need to discuss is why it is important to classify trading. Many of you may think that this is just an endless and fruitless discussion that doesn’t have any merit besides being controversial but – on the contrary – defining the position of trading is extremely important as classification usually determines the way in which a given subject is approached. The way in which we approach Mathematics – what many would call the purest of sciences – is very different from the way in which we study Sculpture, which is one of the classic arts. How should we define trading and how should we approach its development ? What is the difference between an art and a science ?

An art can be defined as the quality, production, expression, or realm, according to aesthetic principles, of what is beautiful (paraphrasing the dictionary here) while a science is a field of study based on a series of principles derived from empirical observation. An art is totally subjective as an attempt to express emotion – what is beautiful – while science is not subjective as its principles are based on experimentation and are prone to change as new experimental evidence that may contradict the initial theories, is found.

What is trading then ? Is trading the subjective expression of emotion or is trading the result of mathematical principles based on observation ? I would say that – from the purest point of view – trading is neither of these two things. Trading is not a subjective field and it does not rely on the expression of emotion, its end results – profits and losses – are quantifiable and not subjective nor dependent on the ability of the trader to convey his emotions to the market (quite the contrary in fact). TradingĀ  now falls into a problem when we try to classify it as a science because it lacks the basic mathematical rules derived from empirical observation that we would assign to a regular natural science (such as Physics). In trading there are no laws that we can use to build our system upon that will give predictable outcomes, there is no theory that explains all market behavior in a convincing way. Since a true science requires future outcomes to become predictable, the mere lack of this aspect in trading makes it go away from what we would define as a pure science.

However it is true that we can come up with mathematical principles based on empirical observation and experimentation that may lead to some form of future predictability. It is also true that trading – in current academic classification – is a part of the economical sciences (as it is simply the act of exploiting inefficiencies in the financial markets). Trading follows the laws of supply and demand -what made economics a science in the first place- and mechanical systems can be designed to exploit market inefficiencies which are detected through observation and analysis.

People who define trading as an “art” generally do not understand the definition of an art and tend to think that trading requires some special set of skills which are not obtainable through analysis and mathematics but which are subjective and developed “magically” through extensive practice and observation (alike those obtained when painting). These people are generally inexperienced traders who are – most of the time – not profitable and lack any strategy which has actual analysis and long term profit and draw down goals. Trading is therefore classified as an “art” because it is seen as being overly complex and no set of “rules” -as in a science such as Chemistry or Physics – is available to describe future outcomes. However trading – although overly complex – has been described by mathematical models in the past and mechanical trading systems to predict l outcomes have been created and used successfully.

In the end approaching trading as a science has many benefits which are lost when it is approached as an “art”. When trading is approached in a systematic and methodical way with the aim of producing systems that generate long term profitable results with clear statistical characteristics it becomes easier to gain profits from the market while someone who approaches it like an art – in a subjective and non-methodical manner – is going to lose money since there is an inherent lack of knowledge about the actual presence or absence of a statistical edge against the markets. All traders who I have asked – who have been trading for more than 5 years -agree that trading is definitely not an art, requiring strong statistical analysis to determine the true possibilities of future success.

If you would like to learn more about automated trading system development and how you too can start designing your own mechanical trading systems with long term statistical analysis and a good idea about your profit and draw down targets please consider joining Asirikuy.com, a website filled with educational videos, trading systems, development and a sound, honest and transparent approach automated trading in general . I hope you enjoyed this article ! :o)

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3 Responses to “Is Trading an Art or a Science ? : Well, Definitely Not an Art”

  1. Maxim says:

    Daniel,

    Thanks for a very interesting discussion!
    There is additional dimension in trading-a trader’s character. This is especially right when applied to mechanical systems, having positive mathematical expectancy. Some of people will be able to trade them and some not, though they are the same systems with same settings…

    Maxim

    • admin says:

      Hello Maxim,

      Thank you for your comment :o) The personality and character of an aspiring trader is definitely something that will affect their ability to survive to changes in market conditions. As you say if you give 10 people a mechanical strategy to trade 90% will fail in the long term due to the mere fact that understanding – a key component in trading a system successfully – is missing. I believe that personality traits can make trading easier but I don’t believe that they exclude a trader for success if adequate analysis is present. Long story short, personality and character play the biggest role in the beginning but they ease out as understanding becomes predominant because understanding – unlike personality – is not subjective. Of course, I will write a post about all of this in the future :o) Thank you very much again for your comment,

      Best Regards,

      Daniel

  2. alex says:

    you must be the only one that says trading is a science. i personally think the same way.

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