Debunking the Consistent Profitability in Trading Myth

By | March 2, 2015

MythBustedThis post was inspired by an email exchange I had over the weekend with a reader of my site who, in his own words, is ‘an absolute beginner’. He was surprised when I told him that even experienced traders can have negative years. So it lead me to think about this common misconception that most people who are new to trading have: that after a learning period, who the most naive among them think it’s not longer than two months, they will reach the stage of ‘consistent profitability’ – a sort of trader’s nirvana – in which they will very rarely experience monthly losses and never have negative years.

I believe this myth is perpetuated mainly by a good percentage of those who sell trading systems and educational services, for reasons too obvious to elaborate here. So what anyone interested in this subject should do is look at those who actually trade – and have been doing it transparently for years, as opposed to those who are just selling trading related stuff. A good place to start is Altegris Manager Rankings. We can find here some famous names, like William Eckhardt, who together with Richard Dennis started the ‘Turtles’ experiment in the 1980s and was also featured in Jack Schwager’s New Market Wizards; Jerry Parker, an original Turtle; Salem Abraham, featured in Michael Covel’s The Complete Turtle Trader, and others.

Let’s now see how ‘consistently profitable’ some of these traders have been during the last ten years (2004 – 2014): Salem Abraham had 4 negative years, William Eckhardt two, Jerry Parker three, William Dunn three and we can go on and on like this. What we can see is that it’s very hard to find a trader who doesn’t have a negative year once in a while. If we look deeper, at the monthly results, we can see streaks of five or more consecutive losing months. How’s that for ‘consistent profitability’ ? :)

In conclusion, the real trading, as it can be observed by looking at professionals with decades of experience, is often very different to what new traders imagine or are lead to believe by unscrupulous salesmen. The sooner one deals in facts, rather than fantasy, the better it will be for him.

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