Author Archives: JLTrader

Launching The Trading Challenge

If you want a thing done well, do it yourself. – Napoleon Bonaparte

There are a couple of things that as far as I’m concerned are done very poorly, and out of this frustration you might call it, arose the idea of this project. Firstly, the trading competitions. Almost every broker runs one from time to time. Going by how they are organized, it would be more truthful to call them gambling competitions. How else, when the winner is the one with the highest percentage return over the past month. Not only does this cast the trading business as a whole in a bad light, making it hardly distinguishable from gambling, it also hurts the participants. At the very least, if it’s a demo contest, they won’t lose any money right then, but will learn bad habits. And that will lead to losing actual cash, not just demo $$, if they open a real account.
Secondly, there are those who sell the ‘get funded’ dream. You know, firms that bleed you dry, at the rate of a few hundreds a month, promising that if you pass various tests, designed specifically so that a great majority fails them, you’ll get funded. To add insult to injury, the ‘funded’ accounts of 50k or 150k that hypnotize beginners come with so many strings attached that’s practically impossible to actually make a profit with them. A good example of the above might be TopStepTrader, mentioned in a post by yours truly in 2015 and reviewed by TradingSchools.org.
Trying to fix these two broken models, I came up with ‘Winner takes all’ trading challenge. On the first point, it has a ranking criteria that puts skill way above luck in the ‘what it takes to win’ equation. Of course, when you deal with a fixed time period and when the difference between the first, second and third places is small, you can’t say that luck is totally irrelevant. BUT, it takes skill to be profitable while keeping your draw-down in check. On the second point, there’s no BS or false promises. One knows from the start what the prize is, and the conditions to participate are clear and simple.
As an ending note: this is just the beginning. If and when the trading challenge gets traction, the first step will be to increase the prize, followed by other tweaks and improvements. If you think you’re ready, you can join now. If not, I would be grateful if you spread the word.

One Thing I Learned in 2016

Abandon hope all ye who enter here – Dante Alighieri, The Divine Comedy

In 2014 I read an article by Andreas Clenow, Why managing your own money is a bad trade, that resonated with me because it elaborated on what I was already pretty much thinking myself. To wit, managing OPM (other people’s money) is the logical next step once you’ve put together a decent strategy. There are exceptions (Jesse Livermore for instance), but generally this is how the big names in the trading/investing world became big in the first place: from Warren Buffett, to George Soros or Paul Tudor Jones.

The thing I learned though during this year is that it’s practically impossible to branch out into OPM if you’re coming from the retail side, armed just with a track-record. Assuming it’s good or even decent, no one that counts is going to look at it – above the stigma that retail side carries with it, there’s a lot of competition from established professional traders who nowadays cater to individual investors too, not only to the traditional market of $1M+ net-worth people that can invest in hedgefunds.

There are a plethora of firms that promise to connect home-based traders with investor capital – perhaps the one that appears most impressive being FundSeeder, which has Jack Schwager on board. Notwithstanding the sometimes persuasive marketing of these companies, my opinion is that it’s all a waste of time. Each firm has a slightly different revenue model and they might end up being profitable. But a trader hoping to access meaningful OPM through them, will be sorely disappointed. Of course, there might be exceptions just as there are people who win the lottery twice.

I’ll finish this by saying that I don’t know a surefire way to attract OPM, if you’re a regular Joe with no experience/acquaintances in the high finance circles. I do know though that what you find by googling ‘get funded’ or variations thereof will be a dead end.

Can You Handle The Truth?

Jack Nicholson: You want answers?

Tom Cruise: I think I’m entitled to them

Jack Nicholson: You want answers?

Tom Cruise: I want the truth!

Jack Nicholson: You can’t handle the truth! – from the movie A Few Good Men (1992)

So what’s the truth that a lot of wannabe traders can’t handle? Actually, there are plenty of them, but today I’m going to concentrate just on one.

Whenever you see self-professed trading professionals or alleged trading millionaires sharing uplifting (unverifiable) personal stories, you’re being taken for a fool. The latest instance of this comes via Facebook ad from none other than Nial Fuller.

It’s less important who the guru ‘du jour’ is, because the pattern is always the same. The guru is a ‘lost’ person, unhappy with his life (be it 9-5 or running a business), when he discovers trading. Lo and behold, everything begins to change now, and in a short while, the sky is blue again, sun is shining and the birds are chirping. He now lives the life he’s always wanted, has location independence, plenty of cash, is his own boss, the whole enchilada.

He tells you this story in order to inspire so YOU too can become like him. And because we live in an ‘instant gratification’ world, it will take you much less time than it took him. Just buy the course or whatever he’s selling. (you’re in luck, there’s an Xmas special offer :) ).

Of course, this is all BS and smoke-screen. If the story was true, then the guru would have no problem in substantiating it and also he wouldn’t refrain from showing a verified track-record.

Don’t get me wrong, I like uplifting stories, at some point we all need a bit of extra motivation. But I also like to deal in reality, not fantasy. You need motivation, read about the life of actual success stories, you know, people like Warren Buffett, Richard Branson or Arnold Schwarzenegger.

What all these fake gurus like Fuller do is create a fantasy and then try to sell it in the non-fiction, biographies&memoirs section of the bookstore. That’s the truth. Can you handle it?

Why I Stopped The ‘Verified Performance’ Account

Since early December last year until this week I’ve had a ‘Verified Performance’ widget tracking the performance of a live 10k account at Darwinex. This post is to explain why it got started, why I shut it down and the way forward.

Close followers of my site know that I’ve been an enthusiastic cheerleader of Darwinex, believing it will disrupt the asset management/mutual fund industry. So of course that as soon as they offered corporate accounts (you don’t go for a potential income of millions of $$ with a personal account, now do you? :) ) in November last year, I joined. As they say, what a difference a year makes. Long story short, I very much doubt now that the DARWIN as a product and Darwinex as a company, in their current format, will make significant progress in attracting investors and AUM. I won’t get into more details here, if you’re curious you can read the posts I made on their forum or contact me privately.

While the above was perhaps 90% of the reason why I started that account, 10% had to do with making my site even more different and unique compared to the rest of the other 1M  trading related sites. So after 90% of my original motivation when I  opened the account disappeared, I had the following dilemma: should I continue to run it at Darwinex, move it to a different broker or close it? After debating with myself for a few days, I decided for the latter. Main reason being, I didn’t see the utility in it anymore. To those critics who would be quick to point out: ”yeah, then you’re now just like the guys you’re bashing and calling scammers” I will answer that it’s not the case. I haven’t so far and never will imply more or less overtly that trading is easy, you can do it on your smartphone while sunbathing, you can effortlessly take 1k to 10k in a year, all you need to become a professional trader is a $300 course and all other sorts of  BS so ubiquitous on trading sites. Always keep in mind what Carl Sagan said: extraordinary claims require extraordinary evidence.

The way forward as I see it, unless some very strong reasons will come up, I won’t start another account to show verified performance.

Reviewing The Reviewers

Two of the oldest and best known review sites for trading/investing services, products and companies are ForexPeaceArmy.com (FPA) and Investimonials.com. The scope of this article is to show that they are both untrustworthy and more or less fraudulent.

ForexPeaceArmy.com is run by Dmitri Chavkerov, a Russian national apparently living in the US. If you were to believe his story as told by himself, Dmitri was invited to manage $500 million in a $1 billion fund in 2007, when he was only 25 years old. In reality, around that time Dmitri was an Internet-ordained minister who performed a sham marriage ceremony for his girlfriend in a green card fraud case. But maybe he’s reformed since, right? I very much doubt it. When you call someone like Andrew Mitchem a ‘trading giant’ and continually push and advertise his overpriced junk, then you can’t be taken seriously.

Shoulders of Giants
It is a widely known fact that 98% of forex traders lose money. The 2% that are successful can be called giants. The reputation and profitability of traders in this section is beyond question or doubt. – FPA pitch

Andrew Mitchem advertised by FPA

Investimonials.com is run by the master of self-promotion himself, Tim Sykes. I’ve detailed last year, when he deleted my comments on an article and then blocked me on Twitter that his apparent honesty and transparency are just a facade.

All that’s wrong with Investimonials.com in one picture

What is Investimonials.com?
A place to discover the best financial products…and to weed out the worst. We want to help readers ‘invest in the best’ because saving you money and helping you grow and get rich is our top priority.

Trade with Kavan and other penny stock scammers are among the best financial products, right Timmy? And how about weeding out the worst? Marcello Arrambide, aka Wandering Trader has 146 five star reviews out of a total of 161.

Marcello Arrambide rated on Investimonials.com as the best thing since sliced bread

Yet as my review and common sense would say, he IS the worst, 100% scammer.

To conclude: these two sites are run by shady individuals and advertise proven scams as the best thing a (novice) trader would need. Extreme caution is advised when using them .

My Thoughts On The Sterling Flash-Crash

We’re all just one trade away from humility. – Marvin to Bud Fox in Wall Street.

Last night I’d just finished watching an Alfred Hitchcock movie (Frenzy (1972) – recommend it) when I checked my Twitter feed.  It was in a frenzy (pun intended) about GBP – capital letters tweets and charts that indicated a big plunge. I quickly checked the prices, and for a second I couldn’t believe it – almost 600 pips fall in 1 minute in GBP/USD.

My first reaction

My second reaction was to see what lessons could be drawn from this event. Some compared this with the SNB debacle from January 2015 – I disagree with this point of view. That was a ticking time bomb, the only unexpected thing being that it contained a nuclear load (I wrote at that time about it, here). What happened with the British pound last night was a total surprise, of a kind not seen since the flash crash on 6th May 2010.

First lesson here is that unless you’re trading with a bucket-shop, you can’t rely on your stop-loss 100% of the cases. Even if you avoid trading around high risk events (central bank announcements, NFP), you’re still exposed to this sort of black swan events.

Second lesson, in order to survive these huge and sudden moves, you have to trade a size small enough that if the price gaps 10X your stop loss for instance, the account doesn’t get wiped out. To illustrate, let’s say your SL on GBP/USD trades is normally 50 pips. In yesterday’s event, you’d have gotten a 600 pips loss, or 12 SLs in one go. If you risk 5% per trade for instance, that would’ve meant 60% of your account gone in a minute.

Third lesson: play the probabilities. Trader A is always in the markets, with one or more trades open. Trader B has open trades only at certain times. Which one is more exposed to black swan events? You guessed it, trader A.

“My philosophy has always been to stay out of the market as much as possible. The less time I am in the market, the less risk I am taking. If dictated by market conditions, I’d rather make X percent having significant market exposure in only three months of the year than make the same amount while being in the market all the time.” – Mark Minervini in Stock Market Wizards by Jack Schwager

Trading Guru Busted By The CFTC

Listen and understand! That Trading Guru is out there. It can’t be bargained with, it can’t be reasoned with. It doesn’t feel pity or remorse or fear, and it absolutely will not stop…ever…until your wallet is bled dry. – paraphrase of Kyle Reese to Sarah Connor in The Terminator

School of Trade (SoT) has been extensively reviewed by TradingSchools.org in November 2015 and the verdict was: 100% scam.

A few days ago, The U.S. Commodity Futures Trading Commission (CFTC) filed a civil anti-fraud enforcement action, charging SoT with fraudulently marketing commodity futures trading strategies and systems. You can read the press release here.

I’m writing about this case because I believe it is a good example of how scammers can operate and get away with murder for a long time. I strongly recommend you read both the review linked above and CFTC’s complaint. Here are the highlights:

The CFTC alleges that Defendants have: 1) portrayed Dufresne as a successful professional trader with years of experience and numerous awards and recognitions when, in fact, Dufresne has little experience, has never been professionally recognized, and has never been a profitable trader;

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Joseph James’ fantasies about himself

2) touted the profitability of SoT’s strategies and systems and claimed hundreds of thousands of dollars in trading profits earned every year, when, in fact, none of the Defendants’ accounts has ever been profitable;

3) promoted SoT’s “Live Trade Room” in which they purport to make profitable trades on live accounts in real time when, in fact, none of the trades called or profits claimed to have been made in the “Live Trade Room” as set forth in the Complaint can be found in any of Defendants’ accounts.

Defendants sold at least 877 memberships in SoT and took in more than $2.7 million during the period charged in the CFTC’s Complaint.

More than $2.7 million!! Let that sink in for a minute. And then consider the following: that’s only a small part of the damage these scumbags have inflicted on the people they conned. Many customers lost a lot more than the fees they paid to SoT by trying to replicate the fabricated trading success of JJ.

School of Trade is quite big on YouTube, which is a fertile ground for smooth talking salesmen who grab your attention with successful ‘live trades’ and various other tricks.  Keep this article and the screenshot below in mind before wasting your time on YouTube trading gurus. To conclude:

  • if your trading professional has countless YouTube videos purporting to show profitable trades, but no verified live track-record, stop following him. It takes less time to connect an account to a free verification service than to produce one of those videos.
  • just because someone has had a website and been on YouTube for +5 years doesn’t make any of his trading claims true.
  • if it seems to good to be true, then it surely is.

Update: Here is the full, 39 page complaint by the CFTC. It has some real gems, such as the one below:

or the fact that Dufresne was incarcerated for 6 months in 2005 for attempted sale of narcotics, right during the time when he alleged to be a professional trader and hedge fund operator.

A New Low For Social Trading Advertising

I’ve been using ForexFactory for its Calendar feature for a long time. Because they’re decent with their advertising (as in not harassing you with countless pop-ups), I disabled Adblock on the site.

Last night, an ad that I’d never seen before caught my eye:

Tradeo ad on ForexFactory

Clicking on it, you land on this page (which miraculously disappears if you do sign up):

What is wrong with these two pictures? Everything actually. 109k followers for just one trader on a quite new social trading network that hardly anyone heard of? On ZuluTrade, the granddaddy of social trading, having 1500 followers places you in top 10 most followed traders. Further statistically improbable facts: out of the 9 featured traders, there are 6 (very attractive) girls. Names don’t really match the countries these people supposedly come from (does Maria Nicoleva sound Swedish?, Amanda Stoun Portuguese or Anton Williams Italian?)

If you actually search for these names, for no other reason than to learn how to become a top trader :) you’ll get this:

Where is Silvia Mirova? :(

There goes my chance of having a chat with the lovely Silvia :(

All kidding aside, I don’t understand what Tradeo expects to achieve with this, considering that it costs a pretty penny to be featured on ForexFactory. Click-bait is one thing, but downright false advertising is totally different. Do they want to cement the already shady online reputation they have? Or am I missing something here?

A Lesson From The Latest News On Paul Tudor Jones

Bloomberg just reported that Tudor Investment Corp., the hedge fund started by legendary Paul Tudor Jones in 1980 is laying off 15% of its workforce, amid lackluster performance and client withdrawals.

Performance since 2001. Photo Credit: Bloomberg

But if with all I had I still lost, what chance does the green outsider have of winning, or, rather, of cashing in? – Jesse Livermore

So what do we have here? Paul Tudor Jones, featured in Market Wizards (after a five year streak of triple digit returns), who’s been trading since the late 1970s and managed to build a multi-billion dollar hedgefund, has been having problems making money for the past few years.

If you go on social media though, or if you visit trading related websites and forums, you’d be hard pressed to find people who are losing. On the contrary, they make money and many of them are more than willing to share their secrets with you, via courses, DVDs, indicators and so on.

One wonders why, if they’re as good as their Excel tables, photos and testimonials say they are, don’t they help struggling hedgefunders like Paul Tudor Jones? Can you imagine how much they would stand to gain, monetarily and PR-wise?

There’s only one answer: because they’re full of shit. All the smoke and mirrors they’ve created about their experience and performance wouldn’t stand a minimal due diligence process. That’s why they remain in their make-believe world where you can become a successful trader (conveyed meaning: you make money every week) after buying a $300 course.

The real world of trading is much more complex and difficult though. That’s why I’ve been stressing here time and again, look for and learn from actual traders if you want to stand a chance of succeeding in this business.

A Trading Expert With Conflict Of Interest – Huge Red Flag

A few reminders of how conflict of interest looks like – always good to keep in mind before entering into a business relationship with a trading/financial professional.

1. EuroScalperPro, an 100% automated Forex EA, is currently being heavily advertised on Facebook. It comes in a free version, if you sign up with one of the three supported brokers, or a paid one, at $197/month or $1,997/year. No matter which one you choose, there’s the same big conflict of interest: the guys behind EuroScalperPro (more on them in a second) make money – either through commissions on volumes traded or cash upfront – irrespective if the client makes profits or not. If this aspect was clearly understood, I believe only a few people would still want to do such a deal. Particularly that in this case you don’t actually know who you’re dealing with – the About page is hilarious:

Our ability to generate superior risk adjusted returns through widely ranging and evolving market conditions has captured the attention and respect from traders, fund managers, investment houses and private wealth managers worldwide. Our Commentary and Research have been quoted across the Internet and we are widely regarded as the authoritative source on quantitative Forex trading.

It takes some chutzpah to write something like this when no names, no faces and no supporting evidence are presented.

2. If someone got the impression from the example above that this happens only with anonymous companies, let me present Boris Schlossberg and his BK Asset Management.

2. What fees are associated with the Managed Accounts Program?

There is no management fee. BK Forex Advisors is compensated via rebate from broker.

Or, if you prefer to pay upfront, you can do that on the other website, for $145/month.

If you’ve been around Forex for some time, the chances are slim that you haven’t heard of Schlossberg or his business partner Kathy Lien. In their own words:

We are known in the forex community as Traders First Analysts Second because unlike market commentators who simply offer up their opinions, we risk our own capital in the market every single day.

But a word of warning: don’t make the mistake of asking them to substantiate the ‘Traders First’ part. You might get blocked (Boris) or ignored (Kathy).

fxflow3. FINRA Files Complaint Charging Broker With Fraudulently and Excessively Trading Accounts of Elderly, Blind Widow

The complaint alleges that Werner engaged in a deceptive and fraudulent scheme by churning the widow’s accounts over a three-year period to maximize his compensation by charging more than $243,000 in commissions, while causing the customer approximately $184,000 in net losses.

Beside highlighting again the danger that exists when the interests of both parties are not aligned, this case also shows that even in a heavily regulated arena, there are still some scumbags left.