Mon 1 Sep 2008
Can Teachers Trade - l?
Posted by ray under Psychology
Happy Labour Day Hol to my US readers!
Today is a work day for the rest of the world and one of the hot topics among my Singaporean acquaintances is: do successful traders teach? This seems a simple enough question but it is deceptively so. In fact, there are a number of threads permeating the query. Here are what I consider the main ones.
- If the teacher is successful, he wouldn’t be teaching. This belongs to the school of ‘those that can don’t teach, those that can’t teach’.
- The sole motivation for teaching is money.
- If the teacher is any good, the student would automatically be a successful trader by attending the x-day seminar.
- A successful trader is a good teacher; an unsuccessful trader is a poor one.
In my view all the beliefs rest on dubious foundations. So, let’s turn to (3) first; I see that as the foundational process - the process where the integrity of the teacher and student meets.
In any educational experience, we have a partnership between the student and the teacher - this is especially so for traders. As the student, I promise to understand, learn, apply and evaluate the material (whether or not it suits me. I suspend judgment until, at the very least, I can say: I thoroughly understand the system). As a teacher, I promise that what I am teaching I know will lead to the student’s outcome IF the student applies the material.
If seminar attendees fail to apply a teacher’s material without keeping their promise, then they are kidding themselves when they say: “I want to be a successful trader”. A teacher fails in his duty when he presents material without knowing whether or not it has led to the outcomes he promises. The key word is ‘KNOW’ i.e. I have evidence beyond just my conviction that something works.
Let’s now turn to (1).
I find it odd that we can entertain the idea that success in one field meets automatic success in another. My comment that just because I can beat Tiger Woods in golf means I can thrash Nadal in tennis, would not be taken seriously (and that would be an understatement). Golf and tennis are separate skills. So too with trading and teaching. The fact that I can trade does not mean I can teach it; by the same token, I may be a great teacher but not a successful trader.
I believe the teacher must have at least experienced trading - it’s difficult to understand the pressures a trader faces without first-hand experience. But he need not be a successful trader to be a great teacher. Even in the case of teaching about a system or method, as long as the teacher KNOWS the method works (backtesting, other traders using the system as taught), he can use his teaching skills to impart the knowledge.
Tomorrow I’ll deal with the other two points.
September 1st, 2008 at 1:06 am
I’ve always had an issue with this. I read everything I can about the industry, books, mags, blogs, etc. I’ve always found it interesting when people start selling their systems of trading. I like to compare it to Back to the Future 2. When Biff gets the sports almanac from the future he has two choices. One is to use it and one is to sell it. Yes, he could sell it and presumably get a kings fortune. However, he decides to use it, and become the richest man ever. If someone is selling their system I already mark it down as a failure. It may have been good in the past, during a short lived market cycle but it’s obviously not good now. If it was good the trade wouldn’t use it. Typically, alot like arbitrage one has a system based on the various information they can pull from the past and correlate it to the present. If the sell the system and other start to use it then it becomes less successful by default. Similar to arbitrage, as more people learn about the potential profit and come in, the profit becomes smaller until it’s at parity.
So yeah, teach trendlines, and fib retracements is fine, I’ll listen to you teach that, but trying to tell me you are or were a great trader and then hard press me to buy your system hurts the fabric that is teaching.
IE. Tim Sykes www.timothysykes.com
September 1st, 2008 at 2:29 am
Hi Tim
Thanks for the post.
I found it hard to identify the essential message of the post.
It seemed to say that you treat attempts to teach mechanical systems with suspicion because they have a in-built self-destruct mechanism. If that is correct, the implication is no successful mechanical trader would trade his system.
I’d agree with that.
And that brings me to a point I’ll make in tomorrow’s post. That learning a system without having integrated risk management tools and the tools that create the environment for consistent execution of the trading plan is akin to a novice golfer buying the best equipment and expecting that to make a difference to his game.
That fact is not matter how good the equipment, it will make little difference to his game. So, if a novice trader focuses solely on a system, he is unlikely to achieve the desired success.
September 1st, 2008 at 2:45 am
Hi Ray, I can understand Tim’s skepticism and I, at times,have found the material in the book bit difficult at times but when i read that initially you lost a million and now are a bloody multi millionaire,it makes me try a little harder to learn and on page 1 you promise that my trading will scale new heights. So i would rather consider your advice than say someone who hasnt that level of success.Whilst i realize it also helps your profile in business i figure that a bit of wisdom never goes astray. I still use my method which i have researched over 20 years but i am never too ignorant to heed good advice. Now you can buy me a beer!! cheers baz
September 1st, 2008 at 3:59 am
Hi Baz
Thanks for the post.
I agree with you and I continually stress the point. Chose the tools that suit your personality.
The graduate students of STC succeed to the extent they integrate a probablity mindset and the habits of success. These tools, as long as the plan has an edge, are more important than the plan.
September 1st, 2008 at 1:27 pm
I quote:
If someone is selling their system I already mark it down as a failure. It may have been good in the past, during a short lived market cycle but it’s obviously not good now. Unquote
I think this is a sweeping statement without qualifications, eg distinguishing between mechanical systems and using intuition for discretionary traders.
AND if nobody sells their systems, we would not hear of Market Profile by Pete Steidylmeyer and other systems which never die, with the right combination with other tools, to keep them from not working.
September 1st, 2008 at 9:58 pm
Yes, I agree with Baz. My own experience from 20 years of looking at the trading world and teachers was resolved using the concept of “personal utility”. I’m not an economist but from memory it essentially states that “as someone makes more money it has less value to them”.
This means the newbie trader thinks anyone selling a system only values money and nothing else (because this is their own mindset - “money, money, money”).
I find that people “treat the world how they see themselves”, eg; someone who is untrustworthy doesn’t trust anyone else because they think “that’s how the world works”. Newbie traders think “if the system really works why would you give it away - that’s giving away free money and that’s crazy because money is so scarce.” Of course, money is not scarce for everyone.
Someone like Ray who has enough money for all the food, shoes, cars (and hips) he could ever want and doesn’t need to work for earned money anymore has other reasons for selling his courses (ie; non-profit related motives).
But people struggling financially (ie; most newbie traders looking for a fast way out of the rate race through trading) cannot believe that someone could work for motives other than money. Only as my own income in life has increased have I realised the value in other things apart from money.
Another anology would be chocolate. I love chocolate but if I worked all day at the local chocolate factory where I could eat all the free chocolate I wanted then suddenly chocolate would have less value now I have more than I need. (This actually happens at Cadbury here in Australia - workers are allowed to eat as much as they want on site - guess what - they eat no more than normal and in some cases even less).
So the problem revolves around the different “personal utility” levels of the newbie trader versus the trader who has succeeded financially and is teaching. The newbie values money alot more than the successful trader who has made a bunch. This is why many cannot understand why Ray is “giving away his money making tools for free - is he crazy!!??”.
Personally I never thought or believed a top trader who actually trades every single day would bother teaching others (”too busy making money”, etc). In all my travels I only ever found sharks who didn’t trade but instead made their money selling the dream: useless courses that didn’t work. Then I came across Ray (1989, Sydney Australia) and since then I’ve met other top traders.
I’ve found you must dig through much rock to find the very small diamonds that are worth so much. You must also believe that diamonds exist otherwise you won’t even bother looking. Apart from Ray I have a few other mentors willing to share how they trade. They are very hard to find, they are selective in who they teach, but they do exist - something I previously would have never believed. The key is that you must seek them out.
Another analogy would be looking at rich people and their philanthropic endeavours (and the reactions of those not wealthy). Most people of limited means would look at someone wealthy they heard donating $100K towards XYZ charity and say (amongst other things) “are you crazy, giving away all that hard earned money, getting nothing back for it!??”.
Again, the newbie mindset only values money and nothing else. Only once you have too much money do you understand the value of helping a charity and how much it can do with the funds.
It’s the same for financially independent people who have time on their hands (ie; now they don’t need a great deal more money) and who donate their time to charity work or just helping others. The newbie mindset just thinks “what, are you crazy, giving away your time for for free, I haven’t got any free time, I need to be making money with every minute I have given I’m struggling”.
So naturally, most people don’t believe (ie; don’t trust) others offering the proverbial “something for nothing”. Of course they are right 99% of the time because of the generations of sharks who have taken advantage of people thus creating this protective harm-avoiding stereotype that “you don’t get something for nothing”. But they forget about the 1% of cases out there like Ray which make navigating through the 99% shark field pay off.
In addition, many people are lazy and give up after about 3 failed attempts which means they get burned and ejected from the trading world pretty quickly - well before stumbling across the 1% of diamonds.
Which provides the biggest secret of all in my view (ie; the “personal utility” angle). If you understand that some people eventually seek value from things other than money - once they have enough money - then you can understand why Ray and other top traders want to share their work (and often for peanuts compare to it’s value to you). It’s a difficult mindset to accept when you’re struggling financially because giving away something worth money is unacceptable (because you have none to spare).
But what about the point made in the previous post that “mechanical systems always break” and “an edge know is an edge blown”. Yes, I agree 100% that any simple rule based system or basic edge that is popular and well known by traders will be arbitraged out of the market until the edge is blunt. This is why more evolved methods are required and why Ray’s system has legs in my view.
In my opinion, Ray is safe teaching his method because it’s about the whole market and not a single setup or edge. You cannot take a whole market method and arbitrage it out of the market - you can with individual angles, setups or simple edges.
Regards
Paul.
September 1st, 2008 at 11:29 pm
Hi Paul
There is little I can add to this well-articulated post except to say ‘thank you’ for all the words of appreciation.