I recently read Phantom of the Pits suggest that if we knew his win/loss ratio, he would lose credibility. However, he is a phenomenally-successful trader. He also tells the story of a trader with an 80% win/loss ratio on his trades, but who loses money consistently. How can that be possible? He says that this trader with a high win/loss ratio -- and a small trading account -- keeps all his trades open indefinitely until they eventually become profitable. The problem is that his losing trades remain open so long that they keep racking up larger and larger losses that decrease his equity more and more. Thus, he continues to lose money because the few large losses vastly outweigh his many small wins!
This is why cutting losses quickly is one key to successful trading. Every time I place a trade, I know what that trade must do to become profitable. If I take a long position, the market must go up, right? Well, what should I do, then, if it doesn't go up? I get out! Every time I place a trade, I have a mental vision of what that trade must do to be profitable. If the chart doesn't match that mental image quickly, I get out and move on! If I stick to a flat trade that doesn't meet my expectations, then I am missing the opportunity to make a profitable trade while I sit there and bite my nails! Ahhhh, the cost of opportunities lost!
So someone says, "well, but what if I get out, and then the market goes up?" Chances are, the market will move downward before it goes up. If the bulls had been in charge, the price activity would have moved higher immediately. Thus, a temporary (or permanent) downward movement is more likely if prices don't move higher immediately. Therefore, wouldn't it be wiser to exit with a tiny loss, wait through the downward movement, however limited it may be, and then re-enter the long position when the market shows signs of moving up again? By doing this, there is a very good chance that a trader can get a better (lower) price, so that when that trader enters the new long position later, he or she will make more profits than might have possible by holding a losing position.
My Own First Experience Trading Forex
When I first started trading Forex, I began with a company that claimed that traders could have a consistent 100% trading record. The two guys that trained me, I later learned, had never traded a single contract! In order to become certified to train other new trainees, they required that a trader submit to them a trading record of 50 successful trades -- all on paper. No live money! They would then use those fictitious paper trades to entice other inductees into their program, without telling the newbies that they were fictitious trades. It was a literal hoax! However, a few weeks later, when I went to an event to obtain more training, I was chatting with a fellow new trader, and he said to me, "You know, it's very easy to get those 50 winning trades! You just leave the trade open for as long as it takes to turn profitable!" I told him that's what I had done, too!
Just like with the example that Phantom used above, anyone who trades that way with real money is guaranteed to lose money! This same company sends their trainers all over the country with documented proof that someone can trade 50 consecutive times without a loss. What they don't tell people, however, is that those trades are with simulated, fictitious accounts. They are only paper trades. They also don't reveal to their inductees that those trades don't include all the losing ones that they made that weren't included. I know, because I played their game and did it also. But frankly, their method is utterly dishonest because they don't teach traders proper money management, and they deceive people by using those paper trades as documentation of their success. It is intentionally deceitful. They even tout the Christian beliefs of the owners to disarm people of their skepticism. They even seem like very nice people.
When I first started trading Forex, I began with a company that claimed that traders could have a consistent 100% trading record. The two guys that trained me, I later learned, had never traded a single contract! In order to become certified to train other new trainees, they required that a trader submit to them a trading record of 50 successful trades -- all on paper. No live money! They would then use those fictitious paper trades to entice other inductees into their program, without telling the newbies that they were fictitious trades. It was a literal hoax! However, a few weeks later, when I went to an event to obtain more training, I was chatting with a fellow new trader, and he said to me, "You know, it's very easy to get those 50 winning trades! You just leave the trade open for as long as it takes to turn profitable!" I told him that's what I had done, too!
Just like with the example that Phantom used above, anyone who trades that way with real money is guaranteed to lose money! This same company sends their trainers all over the country with documented proof that someone can trade 50 consecutive times without a loss. What they don't tell people, however, is that those trades are with simulated, fictitious accounts. They are only paper trades. They also don't reveal to their inductees that those trades don't include all the losing ones that they made that weren't included. I know, because I played their game and did it also. But frankly, their method is utterly dishonest because they don't teach traders proper money management, and they deceive people by using those paper trades as documentation of their success. It is intentionally deceitful. They even tout the Christian beliefs of the owners to disarm people of their skepticism. They even seem like very nice people.
Years after I had left this organization, I met the employee of one of the largest Forex brokers in the world. When I mentioned the name of the head of this Forex trading group, this employee started to laugh. He then explained to me that the head of this Forex training group had once traded Forex with his employer's company. He told me that the man continually lost money, and insisted that the broker reimburse him for his losses. (I was then using this same Forex broker, and was very pleased with both the service and the minimal slippage I incurred on my trades. I had no complaints with this broker.)
When the broker refused to refund the losses of this Forex training company's leader, he switched to another Forex broker. Then, by recruiting thousands of unsuspecting traders to use this new broker, he could threaten the new broker with the loss of many accounts if that broker didn't refund many of the losing trades of his inductees.
Ironically, I had also used this same new broker previously, and the slippage I experienced was so excessive that I left. I didn't want to be dependent on someone else for good brokerage treatment. I feel that if I have to depend upon the training company for getting fair treatment from the broker, then I have the wrong broker.
This Forex group trading company not only intimidates the broker into making refunds on bad trades, but they also make their inductees dependent upon them for restoring their lost funds. They apparently make far more money from the referral fees from the broker, than they do from trading Forex. This same Forex group charges astronomical monthly fees to traders for charts, alerting and signaling services, etc. They even planned to start their own Forex brokerage, although I have no idea if they ever did. To this day, they tacitly boast on their website about all the money they donate to charity. This same Forex group still exists today, and they continue to imply at the top of their website that traders can trade 50 or even 200 trades without a loss. They also have an asterisk by this implied promise that has no explanation -- the fine print is obviously buried somewhere to avoid notice and scrutiny (and lawsuits). Apparently, they have successfully fended off the class action lawsuits, because they are still making these claims. However, I wonder what percentage of their students have known any lasting success. Wouldn't that be a much more honest measure of their achievement than to claim that one or two people have traded 50 times without a loss?
The guy who recruited me into their training system eventually dropped out, telling me that he just kept losing more and more money. And this guy made thousands of Dollars from recruiting numerous people into this organization! And yet he lost money!
That sounds like a scam, not Christianity. One should always be skeptical of anyone who tries to lure others into an investment by baiting them with their religiosity rather than their investment or trading success! A very tiny minority of the trained traders have long-term success with this company. I wonder how many tens of thousands of people have passed through their system to find a handful that have made money. How many tens of millions of Dollars have been lost for every one person who makes a few bucks with them?
The point of telling my own personal story, of course, is to make the point that this kind of training may lead people to have a high win/loss ratio, but a terrible trading account balance. They can make lofty claims, but have few successful students.
When the broker refused to refund the losses of this Forex training company's leader, he switched to another Forex broker. Then, by recruiting thousands of unsuspecting traders to use this new broker, he could threaten the new broker with the loss of many accounts if that broker didn't refund many of the losing trades of his inductees.
Ironically, I had also used this same new broker previously, and the slippage I experienced was so excessive that I left. I didn't want to be dependent on someone else for good brokerage treatment. I feel that if I have to depend upon the training company for getting fair treatment from the broker, then I have the wrong broker.
This Forex group trading company not only intimidates the broker into making refunds on bad trades, but they also make their inductees dependent upon them for restoring their lost funds. They apparently make far more money from the referral fees from the broker, than they do from trading Forex. This same Forex group charges astronomical monthly fees to traders for charts, alerting and signaling services, etc. They even planned to start their own Forex brokerage, although I have no idea if they ever did. To this day, they tacitly boast on their website about all the money they donate to charity. This same Forex group still exists today, and they continue to imply at the top of their website that traders can trade 50 or even 200 trades without a loss. They also have an asterisk by this implied promise that has no explanation -- the fine print is obviously buried somewhere to avoid notice and scrutiny (and lawsuits). Apparently, they have successfully fended off the class action lawsuits, because they are still making these claims. However, I wonder what percentage of their students have known any lasting success. Wouldn't that be a much more honest measure of their achievement than to claim that one or two people have traded 50 times without a loss?
The guy who recruited me into their training system eventually dropped out, telling me that he just kept losing more and more money. And this guy made thousands of Dollars from recruiting numerous people into this organization! And yet he lost money!
That sounds like a scam, not Christianity. One should always be skeptical of anyone who tries to lure others into an investment by baiting them with their religiosity rather than their investment or trading success! A very tiny minority of the trained traders have long-term success with this company. I wonder how many tens of thousands of people have passed through their system to find a handful that have made money. How many tens of millions of Dollars have been lost for every one person who makes a few bucks with them?
The point of telling my own personal story, of course, is to make the point that this kind of training may lead people to have a high win/loss ratio, but a terrible trading account balance. They can make lofty claims, but have few successful students.
People Making Money From Traders, Not Trading!
I have learned that there are many people who make money from traders, not trading! It was the same thing during the Klondike gold rush. The people who became rich were not the miners. Those who became rich were those who sold supplies to the miners. Most of the miners went broke looking for that lucky strike. It is the same in trading. That's one reason why I don't sell trading services, and I'm skeptical of those who do. Those who can, DO, and those who can't, TEACH! I have learned that most of those that do sell such services can't make money from trading -- so they sell trading services instead!
The only exception to this is that I have found that there are very good trading books. Instead of spending $5000 on trading coaches -- and doing it again and again -- I would rather spend a few hundred Dollars on some good books. It is a much better, and a much smaller, investment! Many of the book writers have had real trading success, although there are exceptions to this as well.
The only exception to this is that I have found that there are very good trading books. Instead of spending $5000 on trading coaches -- and doing it again and again -- I would rather spend a few hundred Dollars on some good books. It is a much better, and a much smaller, investment! Many of the book writers have had real trading success, although there are exceptions to this as well.
