Today I’ll be considering the last two points in last night’s blog.

• 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.

This is my favourite. As one Singaporean said to me: “I want a method that takes little effort, has few losses, and will make me a millionaire from a small starting capital”. And I would like that levitate - I probably have a better chance at that then he has at achieving his aims.

There is something about the human psyche that seeks something for nothing; but in the markets, that mindset can lead you to ruin. The fact is, trading is a skill and mastery of a skill requires correct practice, feedback, adjustment and above all time spent appropriately.

In Law School I heard a story that is suited here. Two friends entered Sydney University Law School. Both were considered brilliant in high school. In first year, both worked hard but in the final exams just scraped a pass. Quite a come down for students used to and expecting high distinctions. One (let’s call him Joe) started combing the ads for “how to succeed instantly’; the other (let’s call him Jim) reviewed his papers with his lectures and identified where he went wrong. He used this info to change his study habits.

Joe spent a small fortune on ‘instant attainment of law degrees’ but never did graduate; Jim completed the 4-year LLB in 4 years, graduating in the top 5% of his class.

I see Joe and Jim at every seminar I run. Chrisy, my wife, says I ’sell hard work’. She’s right - my aim is to tell would-be traders that success in trading is simple but not easy. It’s simple because the roadmap for success is well laid out; it is not easy because few are willing to move outside their comfort zones to attain the success they say they desire.

For example, at the seminar held in August, the points I stressed were that so long as a plan has an edge, it is immaterial to the newbie how much of an edge it has. What is important is the newbie master habits of risk control and tools to ensure that he executes consistently. Like a newbie golfer, where having the best equipment will not enable him to hit the ball, so too with the trader: the ‘best’ plan will make little difference unless he consistently executes his risk management and habits of success.

Two days later of constantly preaching this message, what is the result? An attendee decides that a black box FX system is the go. In my view:

• a black box is the worst type of plan. You have no idea of the inputs and no idea why and when it is likely to fail.
• this is an almost guaranteed way to fail especially if you ignore position sizing and journaling.

The last point is a variation of point (1) but tends to relate to mechanical plans. The assumption seems to be that if I have a plan that ‘works’, then I’d be able to impart knowledge to trade it. I covered much of what I want to say in point (1). There are a couple of additional points worth noting:

Larry Williams once said that he did not mind selling his systems because 80% would not open the wrapper and of the remaining 20%, 10% would not apply the rules as taught.

If too many traders use the same system, then it will stop working. Unlike a discretionary system, a mechanical system will have entries at the same price and timeframe. Since the market is a self-evolving mechanism, the system’s edge will disappear. Admittedly, the system would have to have sufficiently wide distribution for this to happen but I have seen it occur.

Can teachers trade? My answer is - some of them can and some can’t. Our job as students is to distinguish between the two.

Refer this blog post to a friend or colleague…