Trading Educators And The Live Trade Setup Gimmick

By | April 14, 2015

I commented recently on a website on a subject that’s dear to me: how can one differentiate between the impostors and those who are the real deal in the trading education sector. While in theory Rayner’s premise – ask for at least a year’s worth of documented track-record – is apparently sound, I believe that the reality is not as simple as that. His suggestion would work for mechanical systems where there’s very little or no input at all from the user. As these usually come advertised as very profitable or/and as having very high win rates, some kind of proof is required.

Extraordinary claims require extraordinary evidence – Carl Sagan

When we’re talking about discretionary strategies though, the picture is very different. The quote above still applies, but in this case a track-record offers much less information and it could very well be misleading. How is that possible, you ask ? Because the results are highly dependent on how the individual traders apply the strategy; even if we have two equally experienced traders using the same strategy, if one misses a few good setups a year – for various reasons (holiday, other arrangements and so on) – their performance will differ markedly. The beginning trader could easily get frustrated and quit, or start jumping from one strategy to another when he doesn’t match the kind of performance he was lead to expect (even if only subconsciously) by seeing the track-record.

This brings us back to where we started: how can we tell apart the real traders from the charlatans ? If you lack any trading experience and you’re unable to assess the logic behind one strategy or another, I think the best way is to check the person out to see how genuine he or she is. The more inconsistencies, shady practices and unsubstantiated claims you find on their website or marketing materials, the higher the chance is that you’re dealing with an impostor.

One shady practice that’s not mentioned very often is what I call ‘the live trade setup gimmick’. You most probably have seen videos with charts that have the Buy or Sell levels marked and now the price is far away from the entry level and the trade is profitable. Below is an example:

Example of Live Trade Setup gimmick

Example of Live Trade Setup gimmick

Purportedly this shows us how well the strategy works in ‘live’ conditions. We’re lead to believe that this is not some textbook example, but a ‘live’ setup with real money. The reality is totally different though. Firstly, it’s all being presented after the fact, so the word ‘live’ used to describe it is a misnomer. Secondly we have no way of knowing if the account used for this trade is a real money or a demo account. For all we know, one could open several random trades on a demo account, and if one of them turns out profitable, it is then used to make a video of a ‘live setup’. This sleight of hand might impress a gullible person, but casts serious doubts on the educator’s character.

To conclude: the track-record might be used as a filter in some cases, but a person’s integrity is the most important thing to watch for in this business. As the old saying goes: ‘An honest man’s word is as good as his bond’.

3 thoughts on “Trading Educators And The Live Trade Setup Gimmick

  1. Alex Boyd

    Absolutely, man. Even a track record isn’t enough – what if I launch three strategies, wait a year, and see which one does better? You can never *really* eliminate this concern… even being a member of a regulatory agency doesn’t quite help – plenty of NFA members have broken the rules and scammed others. SEC? Bernie Madoff.

    So in addition to track record, understand why a trader’s strategy works, and check the facts for yourself. Interview them to get a sense of their personality. There’re a variety of ways to perform due diligence, but it’s an imperfect science!

    Nice post.

  2. George

    I Like your site and the drive for transparency. I’ve been through a few so called “educators” these past few years and all they had to offer was freely available online. There is no doubt in my mind you need to find your own way and make your own mistakes and find a method/timeframe/market that suits the person you are.

    I just opened an account with darwinex (like you) so i will be able to better evaluate my own performance with no smoking mirrors. Darwinex looks good so far but I wish they did have a choice of platforms since I never used mt4 in a live environment (I used ctrader and ninjatrader) maybe this will come with time. I will start with darwinex early Feb.

    Keep up the good work as this industry is full of big claims and slick presentations but light on proof….

    1. JLTrader Post author

      Exactly my thoughts, there’s no size fits all approach in trading. I would suggest you write Darwinex and tell them about the choice of platforms. They’re listening to their customers – for instance NY closing charting is coming soon because of popular demand.


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