There are many popular ways to differentiate traders: by the average duration of their trades, the financial instruments they trade, the type of analysis used for trading and so on. Though seldom used, there’s another way of telling them apart that transcends all the above categories:continues here
Arguably, the whole trading educational services industry is a big dream factory. That’s because in 99% of the cases you have self professed trading ‘professionals‘ without any proof of them ever having traded successfully (or even traded at all) purporting to teach others how to do this for a living. I believe this is an unique feature of the trading world. There are a lot of pitches these salesmen use in order to get gullible persons to part with their money, but as you can guess from the title of this article, I’m only going to deal with one of them today: the ‘get funded’ pitch.
There are a couple of firms that I’m aware of (certainly they are not the only ones) which use the ‘get funded’ pitch : Topstep Trader and Apiary Fund. What they basically do is sell the standard (we’re the best, we’ve trained hundreds, we have decades of trading experience bla bla) trading education but with an added promise: if you turn out to be a good trader, you’ll get funded by us. Not only that, but you’ll get to keep 60-80% of the profits realized on our capital. You don’t have to contribute any money and therefore there’s no risk of losing your own capital. Now, doesn’t it sound like a trader’s nirvana ?
Actually, it isn’t. The ‘get funded’ sales pitch has more holes in it than Swiss cheese:
- as with any trading education coming from someone with no trading credentials (verified track-record) it can at best have some quality. It could be much cheaper though to go with the free resources on the internet or several inexpensive books on Amazon. In a worst case scenario, it’s just costly rubbish.
- the criteria used to define what a good trader is and who will ultimately get funded is specifically designed so that hardly anyone would qualify. Their answer to this is usually that they are only looking for the best traders out there, but that’s just a smoke screen. Let me give you one example of a bullshit condition from Topstep Trader that has nothing to do with profitable trading: ‘Achieve an Average Net P&L greater than $0 for each product traded ‘. (emphasis mine)
- the fact that these firms don’t disclose the number of traders that got funded and with how much – even though they’ve been in business for several years – speaks volumes. I see it as a tacit admission that they haven’t funded anyone – for more than a few months and few thousand dollars anyway.
- the fact that once funded, the trader would get 70-80% of profits flies in the face of the whole managed assets industry where the standard payout is 1-2% admin fee and 15-25% of profits with just a few superstars like Steve Cohen getting away with 3% and 50%. So either has the industry been doing charitable work for their investors all these years, or the idea of getting 70-80% of profits is just a nice dream.
I hope it’s clear by now what the ‘get funded’ pitch is all about. How come firms of this type are still in business after all these years then, some readers might ask ? It’s because human nature never changes. There will always be people out there who think they can get something for nothing.
“The pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes.” – Jesse Livermore
There are a lot of “experts” out there who will purport to know the reasons for every 20pip move in a currency pair or stock index. I just want you to think about it for a minute. Continues here
Someone sent me an email asking for my opinion on Andrew Mitchem. This person wanted to buy his forex course but was of two minds about it – on one hand, with it being priced at $2,500 he thought that it must be valuable, on the other hand he wasn’t quite ready to part with his money before asking around first.
After just a little bit of research, my thoughts could be perfectly summarized by the title I chose for this article. But unfortunately for the poor saps who end up paying extortionate fees to this guy, it’s not a joke. This fact led me to writing the present article, instead of just a short email reply. There are so many ridiculous, false, misleading claims on his website, and he charges such large amounts of money that I felt I have to give a warning not just to one person, but to the general public.
All right, so who is this Andrew Mitchem ? In his own words he is a ‘full-time currency trader, investor, private funds manager and trading coach’.
Fund manager: He operates the corny sounding site wealthwithforex.com where he offers managed accounts if you have a minimum $20k to ‘invest’. Although he supposedly offers ‘a low risk trading strategy that provides consistent and profitable results’, there is no third-party verified performance track-record on the website.
Trading coach: He offers a $2,500 online forex course and a $20,000 (!) one-on-one private coaching at your home or office, for one day, wherever you are in the world. After seeing this, it’s easy for beginners to mistakenly equate high price with high value when in fact all that Mitchem does is to sell the trading dream for a very expensive price.
Let me go through some of the most ridiculous, false and misleading statements that prompted me to write this article. On the homepage the latest video is called ‘One trade makes more money than keeping your savings at the bank for a year’. Really ? This is like comparing apples and oranges and it’s totally ridiculous. Even if you don’t make any return on your savings, you know that at the end of the year that money will still be there whereas in trading there’s no guarantee you’ll finish the year in the black.
Also on the homepage, Mitchem boasts that “Forex traders from over 48 Countries have taken my course and the success rate of those students has been incredibly high”. Not only is that an unsubstantiated claim, but there’s no proof that Mitchem himself is trading forex successfully. Bear that in mind before giving him $20k of your money.
In the FAQ, he says that he’s making 5% per month trading h4 and h1 charts (of course there’s no proof of that). A couple questions below, he says that it takes 1-3 months for a student to learn his system effectively, thus implying that after only 3 months one could be making 5% returns monthly. That’s akin to saying that after 3 months of med school, a student will be a better brain surgeon than the ones who’ve been operating for decades.
Then there’s the pitch with the new trader who follows his free advice and he’s already averaging $100-$150 daily with his $3500 account. If he keeps compounding that 3-4% daily return I guess we’ll find him in Forbes 100 in a few years.
Browsing through his website I noticed that Mitchem repeatedly says how he only risks around 0.5% of account on any trade. That supposedly makes him sound professional. Don’t be fooled though, because that aspect of money management, by itself, is meaningless. You can still lose your account even when risking just 0,5% of equity if you don’t have an edge – it’s called ‘death of a thousand cuts’ .
To conclude: Don’t fall for the hype! Andrew Mitchem calls himself a trading giant – at least that’s how he is known on ForexPeaceArmy. But as far as I’m concerned, he’s just a snake-oil giant.
Update December 2015:
I was made aware that Andrew Mitchem has a Christmas sale, another opportunity to see the real sleazeball masquerading as professional trader and fund manager.
So if you decide to fork over $2000 to Mitchem you not only get a 40% discount, but guaranteed 20% performance for next year. Imagine your luck !
Now, let’s look through the facade, shall we ? First of all, you’d be better off spending the $2k on a nice vacation during Christmas and New Year. That discount is a mirage – you can’t discount a bucket full of horseshit because it’s worthless to begin with.
Secondly, you can’t call yourself a trader anymore (let alone ‘professional’) if you talk about guaranteed results.
Reading the terms&conditions we can quickly realize the sleight of hand Mitchem uses with his 20% guarantee: what he practically does is to send out daily trading recommendations. It’s up to the customer to decide which ones he follows and how exactly he implements them. If after one year, the company (Mitchem) doesn’t achieve 20%, then the customer can ask for a refund within 4 weeks.
But here’s the bait and switch: the company doesn’t do any trading !! It’s one thing to say buy EUR/USD, sell USD/JPY and USD/CAD for instance, and a totally different thing to actually take the trades. When the customer will say that his performance is negative, Mitchem can very well retort: well, I only took the EUR/USD and I’m profitable now.
I’m going to repeat myself: don’t be deceived by the shiny website or the smiling face of this scumbag.
Last week’s unexpected move by the SNB is still the main discussion topic in forex traders’ circles, so my article today will also relate to it, albeit from a different perspective. Continues here
I’ve seen the claim in the title in my Twitter feed and there’s also a Business Insider article about it. Not only that, but when we supposedly last had six consecutive positive years (1898-1903) what followed was an 18% correction in 1904.
This would be a strong point in a bear-case scenario. If it was true. But what amazes me is that no one seems to question the accuracy of those statistics. It just gets shared and re-tweeted as if it was gospel truth.
After looking at the actual data though, we get a different picture. The S&P500 was first up six consecutive years between 1947-1952 and then 1953 came with a -1.21% correction. Then we had the ‘greed is good’ eighties when the S&P500 managed eight consecutive positive years (1982-1989) followed by a -3.06% correction in 1990. In the nineties S&P500 made a record with its longest winning streak, nine years (1991-1999) followed by a -9.03% fall in 2000.
I’m not making a case for the S&P500 bulls here. I just think that before we get excited and spread the word about some ‘first time in history’ event, we’d better make sure that it really hasn’t occurred before. Otherwise we’re just like the characters in the drawing above.
Despite evidence last week from Swiss National Bank member Danthine saying the EUR/CHF floor at 1.20 will be maintained, the Swiss National Bank (SNB) released a market wide cataclysm by abolishing the minimum exchange rate and EUR/CHF floor. Continues here
This is the elephant in the trading room. It is rarely mentioned, almost everyone thinks or hopes it won’t happen to them, but all traders will have to face it at some point. Even high winning rate systems (70% win rate) will hit ten (or more) consecutive losses sooner or later. Continues here
This post was triggered by the following ZuluTrade ad that I saw recently:
I felt instantly that something is wrong with it, but couldn’t articulate it for a while . After doing a little bit of research on Zulu – I only knew that they were some big/the biggest platform for signal providers – I can now unreservedly state that the ad is misleading. Saying that the best traders on the planet are at ZuluTrade is like saying that the best footballers are among players of Fifa 15. I think this comparison is very appropriate because from nine traders who are on top and are followed with +$1 Million, eight are trading demo. These so-called best traders don’t trust their strategies with their own money, why should anyone else trust them ?
If we delve into this further, we notice that most of them have been trading their respective strategies for less than two years, and some for less than one year. It also becomes obvious that the general approach is to run EAs on several demo accounts and hope the one which has been successful lately will get a following (notice the bomb icons – blown accounts – in the ‘also known as’ section of their profile).
I guess it’s clear by now that all this is in stark contrast to what it takes to be a good trader, let alone among the best traders on the planet.
Generally speaking, I’m very skeptical of anyone selling Expert Advisors (EAs), for two reasons: 1. from the buyer point of view, believing that you can get your own ATM for the price of an iPhone or less shows lack of understanding of how the world really works. 2. from the seller point of view, it doesn’t make any economic sense to sell something that supposedly produces triple digit returns annually for a fee instead of using it to manage outside capital.
Today I’m going to address a real piece of work, RevTraderPro, which is used according to its creator, one Doug Price, by wealthy clients with $10+ million. In order to get a chance at multiplying your money some 4.000% in a year (!), you’d have to spend around $700-$750, depending on VAT and other taxes. In any case, it comes with 60 day money back guarantee, so what is there to lose, right ? Just read on, by the time you finish this article, you most probably won’t be willing to part with your money anymore.
Let’s see what’s wrong with the ‘Incredible gains in forex’ made by RevTraderPro:
1. Already their homepage gives us a taste of what is to come.
Leaving the hard-selling aside, do people with $10+ million dollars really compound their wealth at the pace of 4.000% a year ? In what universe is this happening ?
2. Looking at the statement on their website, I get the distinct impression that we’re dealing with a fabricated one. I know, they also have the same statement on a live, Myfxbook verified account. So how is it done ? I’m afraid I don’t have a definite answer to that and I will refrain from speculating as long as I don’t have any proof.
There are several wrong things in the picture above, and I have highlighted them: Firstly, the ticket numbers per currency pair are consecutive. This doesn’t happen, unless you make up the data in an excel spreadsheet. Secondly, there is a GBP/USD trade on 10th October 2014 which is closed at 1.6181 and the same second another trade is opened and now the price is 1.6207. 26 pips difference within 1 second on a dull day ? It should be obvious that we’re dealing with fictitious quotes here.
3. I looked at the first few trades of the account – they are the same in the statement listed on Myfxbook as on the website. If you just pay attention to the three NZD/USD trades highlighted: the loss on the first two 8 lots trades up to the point the third 8 lots trade was opened was $80/pipX55pips + $80/pipX13 = $4400 + $1040 = $5440 which is more than the entire deposit.
This further points to a complete fabrication of the statement. But even if somehow there was a reasonable explanation for all the red flags (highly unlikely) – what kind of trading is this when you open 24 lots ($240/pip) in an averaging down fashion with a $5k account ?
Let me end with a quote from the disclaimer you can find on RevTraderPro homepage: ‘The typical purchaser does not make any money using this system.’
Update October 2015: I’ve come to the conclusion that Synergy FX is most probably a scam broker, read the new article here.