i) If somebody’s such a great trader, and/or has such a great trading system, why on earth are they teaching or selling you something?!
ii) You’ll gain as much knowledge from a decent trading book/manual, vs. a trading course, far more quickly and at less than 1% of the cost.
iii) Trading ‘education’ (vs. experience) has never been useful in getting a trading job, although having an MBA will probably help these days.
iv) Being smart’s not that relevant to being a good trader.
v) To become a good trader is probably 5-10% knowledge vs. 90-95% experience.
vi) The most important attribute of any great trader is the ability to control ‘fear & greed’ – oh, and a little humility – these pretty much can’t be taught.
vii) Trading on paper, and/or in small size, is a great way to learn.
viii) Then again, paper trading’s not the same as real trading.
ix) Also, trading in small size is not the same as trading in larger size.
x) The true cost of any trader’s education will be their losses.
xi) Gaining real experience as a trader is always going to be slow and painful.
xii) Good traders cut their losses and run their gains – bad traders inevitably do the opposite.
xiii) Real/profitable trading is at least a 10 hours a day, six days a week job.
xiv) Relying on trading to pay the bills definitely won’t help your trading.
xv) The best hedge funds might earn a net 20% pa – most traders can never hope to beat that – so you’ll likely need at least 500 K of capital to aspire to earn 100 K pa.
xvi) If you do reach, say, 100 K pa, you’re likely just breaking even as you probably sacrificed a salary to earn it.
xvii) If you have 500 K of capital, and earn 125-150 K pa, you’re still only breaking even – see above, and you should have earned 25-50 K pa from passive investment anyway.
xviii) Any firm offering you gobs of trading leverage is trying to RAPE you, NOT help you!
xix) Foreign exchange trading offers the best/most technically based trading possible.
xx) Feel free to substitute ‘poker player’ for ‘trader’ in pretty much all of the above – and I’d never describe a great trader or poker player as a gambler either..!
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Wexboy. Thanks for that post. I do a little trading and have always done so. I have seen various versions of your trading rules many times and I alwatys try to put them into practice (I dont always succeed). It infuriates me how little is understood about leverage. The industry is very big in Ireland, but I cant help but feeling that it will end very badly (probably already has for many clients).
Trading is a huge discipline. In ireland at present there are way too many charlatans offering ‘advice and seminars.’ Your point is valid.
I know of an very strong trader, that keeps to himself and shares his insights with himself. He doesnt advertise what he does nor does he give courses in trading. He is too busy trading.
The true cost of a traders education is their losses only if they use their losses as an investment in learning, and not ignore them in the hope that it will be different next time.
Yep, agree with absolutely everything you say there!
The whole trading training (Jesus, I’ve just noticed one Dublin outfit is now awarding diplomas – aah, they changed their name to something a lot more fancy…oh great, I remember the head honchos well from years back…) and online trading industries should be ashamed of themselves!
On the other hand, the gullible punters are just as bad to be falling for all this stuff – some of them are beyond help! A little education sometimes really is the worst thing!
There is a pretty simple solution (not that the unauthorized outfits would follow it) – you have to prominently display a link on the front page of your website to an audited report on your clients’ aggregate performance. That would really open people’s eyes! I seem to recall the SEC proposed something like that for online FX guys, but I don’t know if it was ever implemented.
Welcome! Came across your site the other day actually – congrats on your ’11 performance – I’ve got to work my way back through some of your posts when I have a chance. If you are/become a regular reader, I’d appreciate a Blogroll link.
From my comments above, you might have guessed I’m even less into online poker..! Very like online trading – you really have to grind it out. And yes – I guess online poker really magnifies and accelerates the risks involved!
Do you feel that your experience has helped in your own investing? Though investing in small-cap stocks must sometimes feel like Chinese water torture after online poker..?! 😉
Having trading and pure mathematics in my guilty history, it’s pretty inevitable, yeah?! But I didn’t have friends who were particularly serious about it, and I wasn’t really into playing poker with strangers, so I’ve never really pursued it.
I think poker and trading (and even investing) are v similar: You need to know the numbers cold, know how to read people (/sentiment/markets), eliminate fear and greed and have airtight money management. I’ve also noted a couple of readers are poker players.
I don’t pay much attention to trading/investing/market/risk statistics any longer – tail risk and risk management itself are so neglected/misunderstood 95.45% of the time! It can be possible to identify a bad trader, or bank(er), in advance though – but you don’t really need to, when you just need to know that one (really large) negative event can wipe out days/months/years of (small) positive events. If you can figure out how to (at least attempt to) eliminate this ever looming negative event you’ll be a far better trader/investor/poker player.
Of course, in the real world, compensation/employment practices are such that traders/bankers will always be well compensated no matter the out-turn…while you as an investor will never be adequately compensated for this risk – so again, no bank investments, EVER!
Lewis Robinson said:
Curious last paragraph – have you ever played poker? I dabbled a while ago and eked out a very small winrate over a reasonably significant sample size – though, as I think is the problem with trading, the variance is enormous. Even after hundreds of thousands of hands there was still a reasonable chance I was a losing player who had gotten lucky.
With trading, variance isn’t as easily measured; and I suspect this makes it easier to overlook just how much impact chance can have on results.
Investing too, really, though we hope long timeframes and sufficient diversification will iron this out!
Pretty big online poker player here (6 years and 1m+ hands at mid-stakes NL). Definitely think there are a lot of similarities between poker and investing.
The volatility in the stock market is nothing compared to poker, where you can lose thousands of dollars in a mouse click (taking a half of a millisecond), even with the odds heavily in your favor.
The big winners are able to avoid ’tiling’ away money on bad decisions after a rough hand, just like good investors must shake-off a bad investment and move on to the next one.
Money management is also hugely important, and I would argue even more so than investing. At least in investing, it usually takes months or even years for a terrible investor to even have a chance of losing their entire portfolio/bankroll – in poker, it happens in an afternoon..