Learn to trade VS find good investment services

Discussion in 'Development and Psychology' started by spyder, Feb 6, 2014.

  1. spyder

    spyder Member

    Jan 24, 2014
    Hi all,

    Somehting in my mind. Everyone thinks he can learn to trade, and trade well. Hoewever, the cruel reality is exacty the reverse as you all know.

    Thinking you can learn to trade well is a strong ego rubber. That's why many say they love the process. When in fact back in their minds is the end result of being a great trader against the big majority of losers or average traders.

    However the end means of trading is that of making money. If that's the case then an alternative to learning to trade well is finding a few good traders that manage your trading capital. It looks to me the probabilities of achieving the end means are much bigger than learning to trade your own money.

  2. jack

    jack Administrator Staff Member

    Mar 29, 2013
    Few things that go into this:

    It's natural for us to have a positive expectations of business endeavors. For example: this is why so many people try to open restaurants with no expectation of failure (because they are awesome cooks, or they are convinced their passion will prevail) while the restaurant industry is littered with the graves of failed eateries (like 4 of 5 fail within 5 years, or something close to that, I haven't looked up the stat recently.)

    So just like that, people get into trading with the same mentality. "They" will be different because they are "smarter", "better", "more educated", etc... any reason you can think of, it just feeds the ego enough to push someone into giving trading a shot.

    Then you mix in things like greed. Which compounds the problem.

    People tend to count profits they haven't even made yet. Putting effort into building out expensive trading workstations, researching the right tax laws to deal with all their potential profit, building out compounding balance spread sheets to project future earnings, shopping around between brokers and giving them hell just to get a slightly better deal than the place across the street... all this, before they have even become consistent traders. It's a real cart-before-the-horse show when you browse forums full of new traders.

    Worse yet, brokers and advertisers know this. They cater to it. They market their product or service as having features traders don't actually need or is not appropriate for their level of trading. And new traders dive in... gobbling it up. Marketing copy with "trading is easy", "we give you all the tools the 'pros' use" and "institutional pricing", or even pitching education modules to help new traders learn (I have yet to find a broker's educational material that can make a trader profitable without any other resource needed.)

    Investing your capital into another seasoned trader isn't an answer either... Doing gives up control, adds expenses, makes the expectancy of any system blunted (after the trader takes their cut, since you're exposed to 100% of the downside but only a portion of the upside,) all the while not being able to get around problems like human greed. You're still going to be greedy, you still have the same issues preventing you from trading well, but now they are going to affect your investment decisions with other traders...

    A great example of this is watching PAMM accounts at some brokers swell with investors because their equity curves appear to consistently go up with few draw downs.. coupled with reading stories about investors taking on loans to invest even more money into a trader who appears to be performing well. All the while they are being suckered into strategies they don't understand (like martingale traders, who's equity curve looks unbelievably good until one day it goes straight to 0.) The risk wasn't removed, it was just transferred outside of your own control. The only thing you gain is not having to invest the time it takes into learning how to trade.

    There are always exceptions to this, some traders and some managed money accounts might be worth the investment. But here's the catch: the best way to understand who's worth the risk and who isn't is being able to trade well yourself and grasping risk management as a seasoned trader (which then leaves you little need to just be a passive investor in other people's trading activity with the aim of not trading your own book.)

    I wrote a bit about subjecting your own capital to other people's trading in the second half of this page:



    In the end .. I think the attempt at learning to trade can be very beneficial for some, even if they never make any money at it. If you can get past the externalization of your failures, the whole process of trading will teach you a heck of a lot about yourself and your personality, all the while humbling you (which makes you a much more 'human' person to be around.) Of course, most don't ever realize this. They'll blame the broker / market / trading product / platform...etc.. for their losses and wash out, never to return, unless it's to join a forum and tell people trading is impossible or a scam. Ignoring the possibility that trading itself can be difficult, and in the end that 90%+ lose statistic was dead on.

    Human beings frustrate me sometimes.
  3. foreigner

    foreigner Est. 12480 Hours and Counting

    Aug 22, 2013
    Beautifully put. Some wise and inspiring words, thank you Jack.

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