How to know if a ‘professional’ trader is lying to you.

It shouldn’t come to a surprise that being in the finance/trading world we are that we are constantly being lied to.

The financial industry and marketing machines are constantly trying to find new ways to lure us into thinking that they have the next best thing in trading.

Whether its a new trading strategy, a new mentor who has apparently has more experience in trading then you have been alive or an amazing new black box indicator that plans with rob the banks dry, we’ve seen them all.

And even after we all know that they are lying to us, many of us still get sucked in to their whims, why?

  1. Because, maybe, deep down inside we want it to be true.
  2. We don’t really have any other way of knowing if they are lying to us or not. We read a few reviews and checked out their ‘results’ and then simply hand over our credit card number only find a few months later that the system never worked anyway.

There needs to be a way to make better informed decisions about what your purchasing or who your following.

So whats the most effective way of understanding if a trader/system or strategy is really profitable? The answer is simple – track their performance.

How we ‘track’ their performance?

Through the Trading Consistently Journal, of course!

Our platform is the worlds most flexible trading journal, and can be used not only to track your own performance, but others as well.

Today I’ll show you how exactly I was able to tell that a significant trading authority was actually giving out unprofitable (and possibly misleading) signals.

I recently started following a significant trading blog where the head trader claimed to be a profitable trader with many years experience (identity will be kept private for legal reasons) from a major brokerage firm.

The head trader would give out ‘free’ trading signals to customers who have funded their accounts. I instantly got the urge to see just how profitable these signals were. So let’s see how we tracked him:

Step 1: Create a brand new plan

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We started by creating a brand new plan in our Journal. This is open to all of our Professional members.

Step 2: Designed a very simple plan with few variables.
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We simply dragged and dropped the fields we needed in our Journal that are relevant to tracking this traders performance. We used a combination of date, multiple choice, file uploads and number fields.

Since we are not tracking or managing our own psychology we removed these fields and any other fields not relevant to this.

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Here is a full screenshot of how our Journal looked like in the end.

Step 3: Screen capture all of his trade signals.scr2

We subscribed to the E-mail service and captured all of his trade signals in the platform, including charts. We always use a tool called ‘LightShot‘ to make screen capture easy and quick. The process was super quick since we only had few fields to consider. We collected around 30 trades over a month.

Step 4: Review the outcomes of his trades

After collecting a decent sample, we reviewed his trade results. Since they were on a single currency the process was really easy to go back through each trade and mark of the outcome of each one and add charts, if needed. The process took less then half hour.

Step 5: Collate the Results

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After reviewing the outcomes we opened our Dashboard and used it to create a chart of his results in under 30 seconds.

The results

 

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The results we’re so bad, you’d think he was worse then a retail trader. With a winning % of around 35% (and having a roughly 1:1 – 2:1 risk to reward strategy) makes all of us scratch our heads as to how he gets away from being a ‘head trader’. While we understand our sample size wasn’t large, it was still nonetheless a significantly losing strategy.

However, most new traders won’t question this trader’s abilities because of the convincing profile of the trader’s ‘head trader’ status and the fact that they most likely won’t have the tools like the Trading Consistently Journal to keep a track on him like we did.

Guess that’s why you’ve got to be careful of the motives of who is supplying you ‘free’ signals (or even paid signals). Brokers only make money when you trade, whether you win or lose. Anything to make you feel safe enough to trade is a good business for them.

Luckily, you can prevent this from happening to you with the Trading Consistently Journal. What would you want to keep a track of?

Got a story? Let us know leaving a comment below.

Sow Behl

Sow is a 6 year trading veteran primarily trading FX and equity markets making 1982% return in 2014. After spending years and countless failures trying to find the elusive holy grail lead him to discover elements of what truly makes successful trader. Sow founded the Trading Consistently Journal as a mission to help all traders understand and improve their trading psychology, discipline and consistency. Learn more.

2 Comments

  1. It’s a shame you don’t have a donate button! I’d certainly donate to this superb blog! I suppose for now i’ll settle for book-marking and adding your RSS feed to my Google account. I look forward to brand new updates and will talk about this site with my Facebook group. Talk soon!

    Reply
  2. Great article – I hope all your clients read this twice. No one should be believe anything (how’s that for an absolute?) said by a “professional” trader until they see said trader’s verifiable track record. If you ask for a track record and the “pro” won’t or can’t provide it, chances are near 100% you are talking to a wannabe.

    Reply

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