“Don’t be a hero. Don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.” – Tudor James
As a trading signals strategist, funds manager and coach, prospective clients and trainees often ask these questions:
What percentage profit can you guarantee per month?
Would you promise that there won’t be losses?
Can you guarantee that I’ll be a competent trader after this training?
Before answering the questions above, please consider the senselessness in asking for guarantees of certain things in life, not in trading alone:
Give me a guarantee that my marriage will be problem-free.
Give me a guarantee that I can’t be sick.
Give me a guarantee that this drug will cure my illness.
Give me a guarantee that I’ll get a job after graduating from this university.
Give me a guarantee that none of these cars will have an accident.
Give me a guarantee that this lovemaking will result in pregnancy.
There are long-term successful traders all over the world. As successful trading experts, some people now talk about them and their trading beliefs. Some traders would like to become their clients or trainees. They’d like to make some pips like them (they only survive the markets by making more money than they lose), but they’d never accept the possibility of losses. They want perfect trading results. My advice to people with this kind of mindset is: “If you won’t get involved in the Forex markets without getting guarantees, you may try something else. There are many low-risk ventures out there.” Risk is compulsory in any game of speculation. Without it, there can’t be profits. The bigger the expected gains, the bigger the losses; the smaller the expected gains, the smaller the losses. Successful traders take risk control very serious, while using positive expectancy systems that enable them to make average profits that are much bigger than average losses.
Many believe certain spiritualists can predict the future with stunning accuracy, as it’s being popularized by the media. No prophets can predict what the markets would do tomorrow. No-one can determine what happens to the markets in future. I’m not saying that religious faith is useless, only that the markets don’t favor anybody because of their religious beliefs or post. Nobody is immune from unforeseen occurrences that do befall mankind: take earthquakes and tsunamis for example. Nowadays I’ve personally seen prophecies that failed woefully. I’ve witnessed prognoses that weren’t fulfilled. Like deceptive market forecasters, many so-called diviners tend to keep mute about their flopped prophecies, while mentioning the prophecies that were fulfilled as testimonies. I know students who failed their exams in spite of promises from spiritualists. Academic students fail mostly because they fail to stick to simple instructions from teachers. Likewise, many traders fail because they put excessive faith in trading systems rather than risk control. I’ve seen marriages that crashed despite approval from psychics, plus marriages that worked despite disapproval from psychics. Yet, a person who believes in prediction tends to see a failed prediction as an exception while a prediction that has come to pass tends to reinforce his/her viewpoint.
Astrologers who predict the direction of the financial markets are often interested in the fees that will be paid by their clients. Why would a psychic charge $20 for a service rendered? Why can’t the psychic use his/her perception to enrich himself/herself? Wouldn’t it be better if the psychic buys lotto tickets and makes millions by his/her ability to predict the future? Why can’t the prophet trade on the markets without a single loss and become a billionaire in a short period of time? Isn’t that better than charging peanuts for services rendered for clients?
Personally, I believe that, rather than predicting the markets, traders should cut losses if they’re wrong and run their profits if they’re right. Psychic or prophetic abilities are irrelevant in the financial markets.
This is a paradox. Anyone who insists on getting a guarantee isn’t psychologically prepared to make money. Why am I emphasizing this? It’s because there are certain people who promise the moon and the stars – giving guarantees – just because they want to sell some trading products and services, although they still put disclaimer since it’s legally required that they do so. Don’t just go blindly with what’s popular or appeals to the sense of greed. If a funds manager or a system vendor tells you that you can’t lose, then you’re being deceived by a scam artist. People who don’t want to hear the truth constantly lose their money and learn bitter lessons. No-one can be helped alone by the virtue of loquacious garrulity. Beginner traders fall prey to vendors who give guarantees, halting their sanity in doing so. Because they’ve received guarantee, they use large position sizes and eventually crash. Many novice investors and speculators are now worse-off regardless of the unrealistic guarantees they were given in the past. “I get fed up with the educators that come in and say, ‘I’m going to make you rich beyond your wildest dreams.’ I am very realistic about it. Most people will lose, and it’s not necessarily the methods they’re using. I think that the psychological, the mental and emotional aspect of trading probably kills more people than the methods they use.” complains Joel Parker in a recent interview.
I’m not saying this to support or oppose atheism or religiosity. I believe that a good religion provides people with high moral standards and discipline. But you should beware of people who talk as if they’d the power to move the market in their direction. When it comes to the mechanics of trading, I am convinced that traders have only natural abilities at their disposal in navigating the financial markets, not supernatural ones. The best and the most adroit traders don’t know the future, and therefore can’t ethically and responsibly give assurance of gains.
Given the nature of any type of financial markets, it’s unrealistic to give any guarantees. Guarantees mustn’t be made, never by any sane professional. So my answers to the questions asked earlier are…
What percentage profit can you guarantee per month? Nope.
Would you promise that there won’t be losses? Nope.
Can you guarantee that I’ll be a competent trader after this training? Never.
Guarantees in Trading Are Unethical and Irresponsible
Yes trading activities need no assurances. Some traders are so skillful that they may be referred to as being clairvoyant, whereas the ostensible clairvoyance is a result of years of experience and learning. There are timeless principles that can contribute to constant and permanent survival in the markets. For example, thru risk management and safe position sizing, a good trader would only sustain negligible roll-downs in bad markets and easily recover the losses and move ahead in good markets. But no matter how good you’re, you should never give guarantees as regards any level of trading outcome.
Anyone can open a brokerage account and start gambling but professional trading of statistical evaluation requires skill and risk control. Inevitably, losses will be included in our trading account history. Skillful traders make money by following their entry criteria and making sure that they eventually make more money than they lose. Forex trading, which is my own area of specialization, requires years of learning the things that work and the things that don’t work. This is a fact, so one needs not get blinded by personal bias, ignorance, myths and destructive pig-headedness.
Traders should talk in terms of probabilities and caution, not with brazen impudence and guarantees. The quote above this article supports this. We must be humble in our trading career – permanently humble. Pride is very dangerous to our long-term survival in the markets. A skilled surfer humbly knows his size and strength relative to the ocean, and respects the waves. A skilled trader, likewise, knows his size and strength relative to the worldwide marketplace. There is no place for over-confidence. We should always use discretion and common sense in our trading careers. Another basic problem is that there are many people with really good analyses who can nevertheless gain no added value from those analyses. In other words, many experts are essentially right on what they conclude from their analyses – but they’re often right at the wrong time or they’re using the wrong instruments. This is the only way to become better at trading. Trading mastery is an ongoing process; a journey of a lifetime.
Finally, a trader who wants to survive long enough must never repeat his past mistakes. We should always acknowledge and learn from our errors: trying never to repeat them. A trader must take advantage of the wealth of experiences gathered on the battleground of the markets; moving ahead regardless of any uncertainties of the future. But the trader mustn’t be daft and irresponsible as to guarantee certain amount(s) of income.
NB: Please watch out for my coming articles with these titles: ‘An Intraday Moves Catcher – A Wealth Generating System,’ ‘Unlock the Power of Everlasting Triumph in the Markets (Parts 1 – 12),’ ‘How to Handle Uncertainties in the Markets,’ ‘The Issue of Stops (Come Back! Oh Come Back!),’ ‘Another EURUSD-USDCHF Correlation Strategy,’ ‘Experiment with Different Exit Tactics,’ ‘Mastering the Market Equilibrium Zones – A Time-sensitive Method,’ ‘How I Apply Risk Management – Part 3,’ ‘A Simple Positive Expectancy System – Trading Effortlessly,’ ‘Testimonies from My Subscribers,’ ‘Excellent Money Management Flexibility – Make the Best Choice!’ ‘Resist the Lure of High Risk – Part 3’ ‘Worst-case Scenarios – Facts Are Sacred,’ ‘Effective Swing Trading in Forex,’ ‘Gap Trading Revisited,’ ‘3 Recent Gap Trades,’ ‘Developing the Right Attitude towards Losses – Part 4 (Losses Aren’t Abnormal),’ ‘The True Holy Grail – The Long Sought for,’ ‘Suicide Trading Techniques,’ ‘Forex Trading Vocabulary,’ ‘ Clarifying Some Issues – Part 5,’ ‘Navigating Turbulent Markets – A Double Timeframe Analysis,’ ‘Optimization of the USDCAD Hedging Strategy – Bringing the USDCAD to Subjection,’ ‘Overview of My Signals Strategies,’ ‘Uncertainty Has Become My Ally – An Interview with a Dogged Market Speculator,’ ‘The Cost of Discipline,’ ‘2 Examples of the USDCAD Hedging Trades,’ ‘Monthly Market Review,’ ‘Monthly Trading Report (August 2011),’ etc.
I end this article with this quote:
“Basically, you’re making a conscious decision to risk something so that you could pick up a potential profit in the future. I think this is why some of us find trading hard to begin with. It’s a totally new mindset from what we grow up with.
We’re taught to work hard and earn a salary. We expect to always get paid and never lose. And I think this could be why we’re not as good at dealing with business risk. I know it’s hard to accept but losing trades are a natural part of any winning strategy. Unfortunately, as soon as a losing streak hits, people tend to panic and quit trading altogether. In doing so you could miss out on some serious profits when they do come. Don’t be like this.
Start treating your trading like a business venture… start developing that entrepreneurial mindset.” – Forex Round Up
Your questions and opinions are highly welcome.
With best regards,
Forex Signals Strategist, Funds Manager &Coach
©2011 FX Instructor Forex Blog - For Traders, By Traders. All Rights Reserved.