"Meticulous Planning Will enable everything a man does to appear spontaneous."

Mark Caine

It's Your Money. Shouldn't It Be Your Plan?

Indicators 101

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If you decide you want to eat healthy, produce from a farmers market could be an excellent place to go.  However, just because there’s plenty of options, this does not mean you should eat them all.  Some may taste better than others, some may cause allergic reactions, some may have strange smells.  Even if the end goal of everyone at a farmers market is to buy healthier foods, there’s no one way to do so.  Everyone will buy what is best for their own purposes, whether that be taste, smell, allergies, or otherwise.

Trading indicators should be no different.  There is a camp that solely trades on price action and ignores everything else, but the vast majority employ indicators in one way or another to help them trade.  However, just like the farmers market example, there is no one way to use them.  The trader has to determine what works best for their own unique experience and desires.

When you look at indicators this way, your life will become so much less stressed.  Even if your goal is to lose weight, there’s no holy grail of fruit or vegetables that can guarantee immediate success.  Likewise, there is no one holy grail indicator that will change your entire trading career.  Indicators can be beneficial, or they can become the rabbit hole that you never stop falling into.  Stop thinking of indicators as magical, and start thinking about them like produce.  They are not the holy grail to weight loss or other results.  They are an important piece and everyone has certain types they like the best.  Trading indicators should be no different.

Now that we’ve established what they shouldn’t be, let’s talk about what they should be.

Before we get into the types of indicators, let’s establish a few rules.

Rule #1. Trading Indicators

This means that when you are using an indicator as a trigger, the price itself would have already started to make the move.  When you are looking for price to get over extended, it will have already done so before your indicator agrees.  

When using indicators, you have to accept lag time.  As they use price in their formulas, they simply cannot print until price does.  Even some of the “leading” indicators still use closed price points to print future points.  If you cannot accept getting in late because you waited for the signal to fire on an indicator, you may have to look and see if indicators are really for you.

Many traders think that certain indicators are leading and not lagging.  The truth is that they still require closed data to print, even if they are displaced forward or otherwise, they still require closed price action to print the formula and as a result I still consider them a lagging indicator.

If anyone truly created a leading indicator, they’d print money every single day.  The truth is leading indicator is just a sexy buzz word because if you could lead the market, you’d never lose.  And professional traders lose constantly, they know it’s part of the game.

Rule #2. Customizing Inputs Should Substantially

Every Indicator has the ability to customize the inputs.  For example a moving average takes the closing price of X number of candles and divides the result by that amount to create a line.  Many traders like to use a 20 moving average.

However, once the strategy is built, traders like to run computerized tests to determine chinks in the armor or areas to improve.  Once that happens, optimization becomes a problem.  If your system is failing at a 20 moving average but working great at an 18 moving average, traders start to over optimize the system based on perfect results.  The reality is customizing the inputs should NOT change the system itself more than 20% or it’s becoming over optimized and will not deliver those types of results in live trading.  

All indicators can be customized almost as much as the trader desires.  The customization should help the trader feel more confident, not change the results.  It’s like a trader eating an apple vs cutting it into sections.  Either the way the apple gets eaten, it’s just a personal preference.  Changing inputs should be viewed the same way for 98% of the traders out there.

Rule #3. Different Indicators Can Accomplish

This rule is imperative if a trader is using a checkmark system for entry.  Some traders like to use 5-7 things that allow entry when they get a majority.

The issue with this is you have to understand (which we’ll discuss in detail) that indicators can accomplish the same purpose.  And if that’s the case, then using multiple indicators on your chart will not add any edge.  You want your indicators to each add significant value to your chart.  If we go back to our produce example, if the goal was only to eat enough fruit to get 100% vitamin C, you could eat an orange and be done.  

You could also eat any combination of other fruits or vegetables to hit that goal, but if you eat them AND the orange, you may not get an added benefit if your main purpose was vitamin C.  You would have been better off having a different goal for the other fruits and vegetables.

As you learn about what the types of indicators and their purposes are, you’ll soon find out which indicators are worthwhile, and which are simply overlapping and unnecessary.  The key to rule #4 comes from thoroughly understanding rule #3.

Rule #4. More Indicators On Your Chart Are

Think of your chart like an expensive leather couch.  You’re proud of this couch, you want to use it constantly, it’s the most comfortable couch you’ve ever had.

Yet for whatever reason, you or your significant other start adding pillows to this couch.  Fancy throw pillows that help the couch work even better, look even better, smell even better.  Whatever the reason, you just keep adding these pillows until suddenly that amazing couch isn’t recognizable nor usable.  The pillows which were supposed to supplement the couch have taken over entirely.

Indicators on a chart should be no different.  When you build your perfect chart, with all the right colors and lines, you feel like you’re in the zone.  Yet some traders read a blog post, watch a video, read a book, or whatever else, and suddenly add an indicator.  Here and there, they really do help.  Yet before too long, most traders end up with a screen so covered in indicators it’s no longer recognizable or usable.  

Don’t let this happen to you.  Remember the end goal of a chart is to help you make a trade.  If you can’t thoroughly explain why every single indicator on your chart is there, start taking them off.  Back to our couch example, what happens when you take off all those pillows?  You get to use the couch again.  The same can be said of your charts.  

If you want to build a separate chart with tons of indicators for research purposes, fine, do so with gusto.  But your trading chart, the chart that is responsible for making decisions, requires better.  Explain why that indicator is there, or take it off.  What you’ll be left with is what you truly decided you need to trade.  And that is a decision that no one else can make for you.  

Trading Indicators Come in Different Categories

Trading indicators come in all varieties and fashions.  The end results, however, tend to accomplish only a handful of things.  Indicators are mathematical formulas that are based off of the High, Low, Open, Close, and Volume.  These combinations along with other mathematical parts have created thousands of combinations, each named after the trader that discovered them.

Yet for all the different combinations, they function for a very few set of purposes.

Trend, Momentum, Volume, & Volatility.  Many guru’s say you should have one from each category in your plan, some require that you have multiple from each.  If you want to chart the CTP Way, then remember it’s your money, it’s got to be your plan.  You get to decide how many and what goes on the chart, just make sure it follows the rules above.

Trend Indicators

Trend Indicators are those that help determine the trend.  Trend strength is very subjective to the timeframe you are on, but when you hear someone ask what’s the trend, and you want to answer them with an answer involving technical analysis, these are the indicators to use.  A few of the indicators that fall into this category are:

  1. Moving Averages
  2. MACD
  3. ADX
  4. Ichimoku Cloud

There are hundreds of them out there, but the majority of traders can find what they need simply using this list.  

We will discuss in detail these indicators on our advanced section indicator 202.  If you prefer to skip ahead, you may do so now, this link will be available at the end of this article as well.

Momentum Indicators

Momentum Indicators are those the help determine the momentum of the trend.  These can also be used as excellent pullback opportunities back into the existing trend.  The final use of these indicators is gauging when a trend could be coming to an end by means of divergence.  

A few of the indicators in this category are:

  1. RSI
  2. Stochastics
  3. CCI

One of the most important factors in using these indicators is remembering what Livermore said, “Markets Can Stay Irrational Longer than You Can Stay Solvent.”  This means, just because you’ve got an overbought signal does not mean the trend cannot keep going.  Look at the general markets since 2012.  

Volume Indicators

Volume is the most important thing after price.  If you had to have only one indicator on your chart, volume would be it.  Volume tells you when there’s a large move starting, when there’s no one left to continue, when to ignore a pullback, and when to pay attention.  Many traders that don’t believe in indicators still use plain volume because it’s that powerful.

A few of the indicators in this category are:

  1. Volume (typically includes a 50 day average of volume to show when it’s stronger than normal)
  2. Chaikin Money Flow
  3. On Balance Volume

Volume is one of those things that some traders simply like to ignore, but when used properly, it can greatly improve the results of some of your trades.  This indicator cannot be ignored.

Volatility Indicators

Volatility is extremely important in trading.  If you buy a stock at $10, and you want to sell it at $11, what’s the potential it will get there?  If you want to place a stop on that same stock, how far away should you place it?  Volatility answers these types of questions.

Examples of Volatility Indicators are:

  1. Average True Range
  2. Bollinger Bands
  3. Keltner Channels
  4. Price Channels

Volatility may sound confusing and some traders may simply want to avoid what they don’t understand.  However, once you see it in action, it may become something you simply can’t live without.

Putting It All Together

Now that you know what categories indicators come from and a few types from each, take a look at your chart.  Are you heavy on one category?  Do you have something from each?  Do you see a need to adjust?

Let’s use one quick hypothetical example before calling it a day here.

The picture shown is NVDA.  We have incorporated one or more indicators from each category.  The red solid line is a 50 simple moving average, the white lines are a 20 range price channel, the indicator with vertical lines that looks sort of like a cloud is called the Ichimoku Cloud, and the three indicators at the bottom from top down are volume, MACD, and Stochastics.

If we were looking for a pullback trend continuation setup, we’d want to see a combination of things confirming a high probability edge.

These indicators will all be discussed in detail in indicators 202, but for now, we are simply trying to show a finished product.  We will go back and dissect each part over future posts.

From our trend indicators, we’d want to see an uptrend.  This happens by price still being above the 50sma, the MACD still above zero, and price still above the cloud.  All options are checked yes.

From our momentum indicators, we see the stochastics has reached oversold by getting below 20.  When looking for pullbacks, stochastics needs to get as close to oversold in an uptrend as possible.  Check & Check.

From our Volume Indicators, we see price spiked near the end of the run-up roughly 2-3 weeks before giving our pullback entry.

On the pullback however, there was no volume strength.  A low volume pullback is an excellent sign that when price starts to turn, the trend will continue.  If the volume was strong on the pullback it could be a sign that traders are getting out.  Since the volume was weak however, the odds were high that there was simply no one left to buy in the short term, not that traders were exiting existing positions.

From our volatility indicators, we can see price got below it’s 20 day range.  A stop below this low by a % of the 20 day range could be an excellent risk reward setup.  

If the trend is to continue, a new 20 day low could become an excellent false breakdown point.  Traders that only used volatility here may be tempted to fight the overall uptrend.

Traders that used multiple categories however were able to see the stronger uptrend and use this short term new 20 day low as a reason to place a high probability buy setup.

 

And there you have it.  Four categories, four different approaches.  When you put them all together, they can create something powerful.

This is what a trading indicator or indicators should do.  When you dump so many on the chart you can’t read the chart, it’s time to change.  When you trade just the right amount for just the right reasons, you can build a consistent and powerful edge.

To learn more training like this, don’t forget to join the CTP Group.  It’s free to sign-up and we only send 1-2 emails a month with training like this delivered straight to your email.

Should This Be Part of Your Plan?

Now that you’ve learned something new, you’ve got to ask yourself if this should be part of your custom trade plan.  Is this new knowledge something that could help take your trading to the next level?  Or is this something that is nice to know but ultimately does not have a place in your CTP.
You have to decide for yourself.  Your Plan can only encompass so much, and every piece that’s in there has to have a purpose.  This does not mean that once it’s written it cannot be changed, but if it’s being changed, it should only be done so for a very specific purpose.  The plan is your key to the kingdom, only put into it what helps you get there.
If you do not yet have a custom trading plan or simply don’t know where to start, we can help.  Head over to our CTP Premium Section to see how we built a swing trading system with a plan from start to finish.  This is the end all systems for plan and trade development.  No matter what part of trading you’re lacking in, this is the answer.
Or if you’re not ready to spend anything on your future, head over to the CTP trading strategies section and see if you can start building something out of that.  We’re always here if you need us, but in the end, you’ve got to be willing to put in the work.
After all, it’s your money; why isn’t it your plan?

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Why You Must Focus on Rs and Not the Dollar Amount

If you’ve ever YouTube’d Day Trading one of the first things you see are videos of things like watch me make $5,000 in one hour or learn how I make $200 a day trading or any other nonsense that is only there to sell you.

The truth is, without knowing how much they were risking to make that, you don’t have all the facts and cannot POSSIBLY consider their strategy legitimate for anything more than selling purposes.

When looking at any trade result, any strategy, or any plan, the secret to success is all in the R.

R or Risk Factor is how much you’re willing to risk per trade.  Typically, the logic goes that you should not risk more than 2% or less per trade.  Many times you’ll hear this in swing trading but not as often in day trading as even that amount can be substantial.

Regardless of what the amount is, the key is understanding why it matters.

If a “guru” risks $1,000 and makes $1,000 and posts a video of it online, it’s impressive to an extent but it’s no different than someone risking $10 to make $10.  They just had a larger account to begin with.

However, if the same guru posts a video that shows $1,039 day come see how at my site” then you’ve been hooked into believing you can start making $1,000 days yourself if you just follow along.

The truth is your dollar amount return is completely dependent on your account size.  If you are only supposed to risk 2% per trade then to risk $1,000 you must be trading a $50,000 account.

This isn’t that large a number in the grand scheme of things, but when you’re struggling to come up with the $500 to pay this “guru” to show you how to make $1,000 a day, be very aware of how much it costs to copy him in all aspects; not just the profit part.

Another important reason of R value is for data comparison and trade management.  At the end of the day if you pull in $300 it is a nice day.  If you have a monetary daily goal as your main focus point (not recommended) and you reach it; then you exit all and call it.) 

But if you want to double that monetary goal, what do you have to do?  Hold twice as long?  Risk twice as much?  By tracking Rs instead of $ amounts, you can quickly see which management style produces the best Rs over the long haul and then simply make the Rs match the goals instead of trying to make the money match the goals.

If you want to make $5,000 a month, you can risk $1,000 a trade and hit it with 5 trades or you can risk $500 a trade and make it with 10R.  They do the same thing but they handle themselves entirely different.

One final point; ever wonder why casinos make you trade in your cash for chips?  Because you can handle yourself better with chips.  If you are carrying around 20s and 100s and playing with them, the money is too real, you’ll play differently.  Trading should be the same, by focusing on Rs and not the $s, you can trade the right way and hit targets whether you’re trading $25 an R this month or $200 an R next month.

Let the Rs show success; stop chasing the $$$.

If you need more help with this, we offer plenty of free training through our blog and email group or we offer a premium service with custom built management and tracking if need be.

What Makes A Trader Professional?

How many different professional traders are really out there?  If you do a google search for professional trading; you’ll get all sorts of results.

From people to strategies to everything in between.  Professional Trading has become extremely blurred and it’s time to clean this mess up.

Level 1: Professional.  The first stop on this list is the true professional.  How can you tell if the person you’re looking at is truly professional?  They must be licensed.  Whether it’s series 7, series 13, CMT, or otherwise, a true professional trader is licensed and governed by outside forces.  If they offer their name, google it and look for a license.  If they offer a company they mainly stand behind, it’s fairly easy to say they are not professionally licensed.

Pros: These are the people that handle large trading for firms.  Training from someone like this gets you true inside access.

Cons: Some of the licenses here can cost thousands into the mid $20,000 range.  They are not doing this for bragging rights, it’s the cost to handle large accounts.  A 1% fee on a billion dollar account is easily enough to cover the startup fees.

However, if you see an ex trader who used to work for a large bank suddenly decide it’s time to share that info with the world for $50 or even $1,500–you’re at the wrong place.  

This is just my personal opinion, but if a trader at that level comes down to a retail level asking a few hundred dollars for a course, I would not believe that they were ever truly at the level they claim.  You would never buy a mercedes to help someone else drive a kia.  Again, just my personal opinion, but I see this alot and I truly don’t understand why.

Level 2. Retail Professional.  Full Disclaimer: This is our Level.  

This is the level for those that taught themselves how to do it and look to teach others as well.  The main reason (at least our reason) that we are not professionally certified is we do not need outside money.  

Spending the fees to become licensed and doing nothing with it simply does not make sense.  If there ever comes a point that we look to grow beyond our capabilities and require outside capital, CTA would be our license of choice.  However, at the present time, the money is not needed, and therefore neither is the license.

Pros: They’ve learned what it’s like through experience, and through a normal sized account.  The main advantage over large accounts we have is that our stops will not disrupt the system, our exits will not take away our profits in the process; our smaller size is one of our biggest edges.  This goes for the Professional Retailer as a whole group, not just CTP.

Cons: Anybody can write a good salespage and it really comes down to gut feel with the training.  We tried 3 different courses ourselves during our learning curve.  It can be extremely frustrating learning everything only to realize they are no better off than you and you must start all over.

(This is why we don’t publish our P&L or account % increases.  If we did, it would either make you think this is too easy, too hard, or be a sales trick.  All of the above are the reasons Account Returns are usually posted, but it truly does not help do anything for the end user, only sell the system.  We fell for that trick ourselves early on and as a result simply decided it will not happen on our site).

Level 3. Everyone Else.  If you aren’t a professional and you aren’t a professional retail trader, than you’re just part of the everyone else category.  I’m talking about the gurus here, not the traders and investors trying to succeed here.

These are the types that offer services that make a million dollars, 200k, 100k a year with doing nothing more than following along.

News Flash.  Insurance companies collect millions in premiums with the goal of collecting more than they pay out.  Don’t you think companies whose sole job is making more than they lose would look into these $300-$10,000 systems if all it took was a computer program?

It’s a lie.  The worst ones are those that work for the main person by entering in first and then letting the hundreds to thousands of followers, the other ones are just as bad but take less time to figure that out as no one’s winning.

Either way, stop looking at trading like a get rich quick scheme and start looking at it like a real business.

Whoever you decide to follow; make sure they match up with your style, your goals, and will work with you to help you get there.

There are lots of incredible trainers and traders out there.  CTP of course, but there really are others.  Some do it for the money, some do it for boredom, and others do it for company.  It really is a lonely career if you don’t do something about it.

Just make sure before you invest any of your money into any form of education; you understand who they are.  

 

$10 A Backtest

No one likes to backtest.  No one likes to forward test.  Everybody just wants to trade live.  

Yet the low barrier for entry, lack of rules from outside sources, and lack of quality system team up to destroy most traders within 12 months or less.  

Ever stop to wonder why?

Nobody wants to put in the work.  

Let’s look at this a little differently.  

The average salary in America is close to $50,000 for a 4 year degree.  This may be slightly off but the math is simple so I’m going with it.  

Most traders that get on YouTube are looking to supplement or replace their income.  Let’s just assume you’re looking to make $10,000 a year on the side as a starting goal.

You found a weekend seminar that for $2,000 will teach you how to trade and make $10,000 a year.  You pay the fee and learn a ton of information and systems and strategies and you are good to go.  

You fund another $1,000 into a trading account and promptly lose it all in 3 weeks. 

Looking to make $10,000 on the side you are $3,000 worse for the wear.  Why is this?

Because you spent 4 years to make $50,000 salary and thought you could make 20% of that after a long weekend and a few all nighters.

Reality Check.  Treat this like a job.  Trading should not be any different education wise than everything else.  The goals can be different, but the timeline should at least be realized here.

New Plan.  Every Back Test or Forward Test (DEMO) trade you do, consider it a $10 deposit into your trading account.  Your account starts at zero, when it reaches $5,000, you’ve put in the time and work to unlock that money and go live if the system has been proven out.

Most traders can easily do 5 backtests a day whether its early morning or late nights.  On the weekends you can take it off or push for as many as you can handle.

If you can do 5 backtests a day, 5 days a week, that’s 25 backtests a week.

25×20=500.  

20 Weeks is the minimum time you should expect to building your plan and proving it out before going live.  

This is not a requirement, just my humble opinion.  You just have to realize that professional traders treat this like a business, and you showing up to compete with them after a weekend seminar is not going to end well for you.

You need experience and confidence to succeed here.  You can build that up over 20 weeks or longer, you cannot over a weekend study session.

 

Stop Comparing Your Chapter 2

It’s really easy in this business to start watching youtube videos of successful traders banging out profits and think you just aren’t going to end up like that.

The truth in life is people are rewarded in public for what they practice in private.  Now this isn’t even counting the entire section of YouTube videos that are simply straight up fraudulent.  There’s plenty of “gurus” who record every day and only show the monster days or who trade both directions with 2 accounts so that they can record the big win they made on the account that worked.  To those types of videos, you just have to accept that life is full of tricksters in every walk and trading is no different.

What I’m talking about is the legitimate successful traders out there.  Whether they are teaching others, showing proof to get you in, or maybe you’re just reading about them online.  These types of traders that have success when you don’t can make you feel like giving up.  

It makes sense to look to these traders for help, but sometimes, especially after a really rough day, you might think it’s just not meant to be for someone like you and you want to quit.  You simply think you can’t reach that mountain top.

If you ever find yourself thinking like that, remember this.  

You need to stop comparing your chapter 2 to someone else’s chapter 20.

You don’t know the struggles they took to get there.  You don’t know the sacrifices they made.  You don’t know how many times they were having the thoughts you are now, and yet they found a way past it.

Trading isn’t for everyone.  It very well may be that you should be calling it, but calling it because you’ve put in the work and decided there’s something better or different out there for you instead.  That is a legitimate reason to move on.  Looking at your results today, this week, this month, this year and saying it’s not even close to them so it must not meant to be is simply not allowed.

Look to others for guidance, for help, for teaching, but never look to others as a reason for why you should throw in the towel.  You might not be where you want to be, but who is?  

Keep trying, and get that chapter 2 to a 3 and then a 4 and eventually a 20.  When it’s a 20 you can compare, but not until then.

How to get out of a Trading Slump.

Trading Slumps are one of the worst parts about this job.  In my old life I installed HVAC equipment, furnaces, air conditioners, ductwork and the rest. 

A bad day meant I got hurt, was too slow, or made a mistake I had to fix the next day.  A good day meant just the opposite and maybe more.

If I put in a furnace on monday, even if something changed and I had to move it, the furnace stayed put.  In trading, a good day on monday can be replaced by a bad day on tuesday.  However, unlike my HVAC career, in trading, the money (furnace) can go and literally disappear.  This makes the slumps in this profession vs others so much harder to cope with.  

Unlike most careers where mistakes can be easily corrected or replaced, mistakes here can compound quickly and painfully, taking away days and even weeks of progress in mere hours.  Unlike most careers where something is left behind to at least speed up the repairs, trading gains can be completely wiped out and a trader can truly be left with less than they started with.

It is for this reason that a trading slump is so hard to handle in trading.  At this point in a trader’s career, there are some serious and tough choices to be made.

The trader that has established their plan, with the right backtesting and parameters set up before going live, can handle this slump with ease.  This is what we talk about day in and day out.

The trader that has not established a plan, that had quick success and decided they were smarter than the rest, until they realized they weren’t.  Those traders are the ones who are googling MACD right now, looking for that one missing piece that makes the plan fool proof.  

That one missing piece that keeps them going until the next failure that the magic indicator can’t fix.  

That sends them on a path of system jumping, guru following, slump sliding that never ends until they realize THEY have to change or they run out of money to try.

The key to getting out of a slump; is planning for the slump.  If you know a slump should come in the range of 5% of your account, than you should not be worried until you reach 5% and then look to your parameters for when it’s time to re-adjust vs ride on.

The key to staying in a slump, is thinking you can out maneuver it.  Every system has a weak point, when breakouts are strong, reversions are hammered.  When pullback are strong, breakouts are broken.  Every system takes the hits, but every system pays the bills when done properly.

The key is not jumping from breakouts to pullbacks just as the breakouts finished their slump and you didn’t know it.  

If you’re in the slump, and you don’t know what to do, get to cash.  Stop live trading and reassess.  The market will always be there.  Longevity is more important than the next trade.  We are here to help if you choose, but trading through a slump without a plan in place is closer to gambling than professional trading.

If you’re in the slump and you’re plan says you have another 4% drawdown before you should do anything, stick to the plan.  

When you plan for the slumps, you can get through the slumps.

Why Parrots Make Bad Traders

Why Parrots Make Bad Traders

Have you ever listened to a parrot?  It hears conversations and spits back little parts of the whole.

That’s what I think of when I hear about other traders piggybacking off “pros” for a fee.  

There are multiple reasons I’m going to explain and several more I’m going to simply ignore.  If you happen to be one of those pros trading for a fee or a trader making a living copying someone else, I mean nothing against you personally.  I’m simply trying to show to the new aspiring young traders or the frustrated veteran traders why this approach in general is the wrong strategy.  There are simply so few traders that have made a living on someone else I’ve heard of them only in passing.  

 

 

Reason #1.  The small profitable Monthly Fee Pro.

There are legitimate professional traders out there that have a proven strategy that works.  They trade a small account and have success but always seem to be pushing their special trading system, bootcamps, private twitter feeds, and everything else.  Why is this?

Because they have a feeler bet business plan.  In poker, the best players will constantly bet feeler bets.  Weak hands typically fold under the pressure while strong hands bet back and let the pros know to back off.

In this trading model, the pros place small lot trades, small option trades, or simply don’t show any results and only show %.  They say this is to help the little trader feel like they can relate, but in reality, it’s a feeler bet in the trading world.  They take the small risk upfront, and because their system is decent, they can produce when the hands are weak.

However, when the hands are strong, they lose like everybody else.  The difference is their constant flow of premium memberships more than makes up for this.  Losses are part of trading; but why are you paying extra just to lose like everybody else?  

These may be the best of the group if you have to pick one to learn from, but do yourself a favor and don’t stay with them.  Risk is different when you bring in so much that it’s not a risk but the cost of acquiring customers.  They may make $500 a day on a good day, but with 200 followers at $99 a month they can make $20,000 a month even on their bad days.

Remember, they are marketing traders, not traders who market.

 

Reason #2.  Fictional Fills.

There is an entire group of traders that call out these perfect fills on breakouts, reversals, penny stocks, etc.  Between YouTube and Emails this seems like the Real Deal.

In reality, these types of traders give what I call Fictional Fills.  The above screenshot is TSLA, not some no name penny stock, not some upstart, but TSLA in 2017.  The daily range was just under $20 with the screenshot being $4.00 ABOVE the low of the day and on volume of over 6 million shares.

Everything in the far right is after the market closed, actual transactions.  For example, not a single share traded today between $355.33 and $355.30.  The entire screenshot is close to a .50c move or 4% of the day’s move yet there was almost no actual volume here at 24,264 shares.

Here’s Some Simple Math

24,000/6,000,000=.04% of the day’s volume 

.52c/$19.85=2.6% of the Day’s Range

Remember, this is TSLA.  If you can’t get filled decent on TSLA at normal times, what makes you think you can get filled on the breakout that the YouTube Trader is showing was exactly $8.00 with a stop at $7.95 and a profit at $9.00.  

Another trick these types of traders do is to take the setup themselves and then call it in the room.  Once they’re already in, especially on the more popular sites that trade the cheaper stocks, the fill slippage can get pretty extreme.  Sheep to a slaughter is the best phrase I can think of to use here.

The screenshot shown is through Tradestation.  If you are considering one of these pros, do yourself a favor and SIM (DEMO) trade with them for a week.  Write down their best trades they called out and then go find something like Tradestation’s order matrix and see the actual results.  Doing this real time can really help see if what they call is even possible to get, but even in hindsight, it should help show the cracks.

 

 

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Reason #3.  It’s Not Your Plan.

Let’s say you found that diamond in the rough.  You followed them for a month and all the trades they called out were available, without excess slippage, and you really think this is it.

So you sign up for $149 a month.  A small price to pay for a lifetime of success.  They start calling out winning trades, and you start making money.  Some of the trades are breakouts, some are pullbacks, some seem to go against everything you believe will happen, but you take the trades anyway because they are the pro and you are not.

Do you know what will happen to your mentality going forward?  Every failed trade that you had a hunch about will cause doubt on the pro.  Every winning trade that you had a hunch about not taking will cast doubt on you.  Slowly, you will begin eating away at your mental fortitude until the pro hits the normal drawdown period and you walk away in disgust.

In the meantime, the pro has collected anywhere from a few hundred to a few thousands from you and is running a “special” on twitter right now to get someone new.

 

Conclusion

Unless you are trading your own plan, your at the mercy of someone else.  When they take a break, when they pack it up, when they hit their drawdown, what do you do?  

Accepting that the key to successful trading is the right plan and not the right guru will change everything for you.  If you feel like you’re on the right track and feel a pro could help, do so in more of a coaching aspect and not as a parroting trader.