Easy Targets: How Retail Traders Are Coerced by Gurus

Humans are prone to deception. The "money making", thus "trading" niche of online education industry is hands down one of the scammiest things that has ever infested our society. The CFTC know this. The SEC knows this. Thousands of people lose fortunes daily by either taking the advice of a "guru" or by literally giving them their money. Charlatans are everywhere.

Many of you probably don't know this, but the CFTC does indeed go after fraud by online educators. Here is an example of one of the worst cases in recent memory: http://www.cftc.gov/PressRoom/PressReleases/pr7464-16

I've been a trader / analyst for 16 years. I have been registered with CFTC, managed accounts, and worked for one of the largest hedge funds on the planet. I am an advocate for the less informed. It is just who I am and despite what I do, career wise, I keep wanting to write about this. I don't put anything online that a regulator wouldn't look at and nod his or her head to, and that includes strategy.

Retail traders have it the worst. The vast majority of them lose money. I saw it all go down during the FOREX boom (2006ish) and I am seeing a near exact replay of the same events, except this time, its crypto. Online gurus show every day, but the story is all the same.

So I am posting this here as a cautionary tale to anyone deeply invested in "online guru" advice. It is LITERALLY the same bag of tricks from these guys I am seeing over, and over, and over again. This time, it is crypto. So I am putting them here in a very simple list to protect others from going down the rabbit hole.

Daytrading is extremely hard. Extremely. Very few individuals can pull it off. I know more about technical analysis than 99% of people on planet earth at this point, and I can say with the utmost of confidence that it is to be used as a framework only. The majority of online "gurus" use technical analysis as the basis for their arguments. There are a number of reasons for this, explained below.

So without further ado, here is the primary list of things to watch out for:

1. Accountability: they keep 2 accounts: long in one, short in the other, so they are never "wrong". They will show these accounts to "prove" that they are authority on the subject.

2. They talk about levels that have a 99% chance of not getting hit anytime soon, so they can adjust their "forecast" daily, without ever getting called out on it, because the level never got hit.

3. They never show performance. They come up with all sorts of excuses for this. The best one is legal, claiming that it is unlawful to do so somehow. This is indisputably false.

4. They are pure technicians. This one requires more depth in explanation: trading only with technicals derived from prices is nearly impossible. I have worked at a top ten hedge fund. I have managed large accounts of my own. Not a single peer of mine, nor myself, would ever think of relying purely on technicals. We would be out of our minds. The short answer as to why: This is a retail fallacy that is spoonfed and believed over and over again. To reiterate, technicals are to be used as a framework only. There are a good number of price structures that hold up well over time, but they are all non-directionally biased. The issue is long-term direction. Things change all the time. While a signal may be good for 1 bar, there is no guarantee it will be good for 10. This is huge problem when you are defining a long term profitable strategy. When you do this, you essentially build a strategy based on risk management, not techncials. The technicals are serving one purpose and that is to define a point (known as point forecasting). This is the biggest strength of technical analysis. Order flow identification is another story and does indeed lend itself to direction in many cases. Technical analysis is extremely poor at determining sustained market direction. Obviously, that's a huge problem because, well, what is your #1 goal as a trader? Figure out where the market is going.

5. They claim that their forecast can be adjusted at high intervals based on any number of factors. This is the most common tactic used to "prove" that they are never wrong.

6. They use the 40% probability trick, once again, to prove that they are never wrong. You see this a lot. Here is a recent WSJ article on the subject: https://www.wsj.com/articles/how-do-pundits-never-get-it-wrong-call-a-40-chance-1519662425?mod=e2tw

7. They use psychology as a blame tactic to why their followers are not successful. This one drives me more nuts than anything above, because it is something that cannot be quantified and makes the listener think something is quite literally wrong with them. Because "psychology" is so subjective, it is wide open to interpretation and masks the fact that the strategy in and of itself, is poor.

8. A lack of data. Similar to #3, but in relation to the strategy itself. This is 2018. It is extremely easy to automate ANY strategy. Even some of the most basic retail platforms are very sophisticated at doing this. Don't talk about the money, show it.

9. Buzzwords: "financial freedom", "easy", "mastery", "profit". A serious financial professional would never say such things.

10. The focus is almost always on "swing trading". There are a number of reasons for this, but most of it boils down to the fact that many of the above items can be blamed during this window of time. Professionals rarely "swing trade". Theya re longer term commodity/currency holders or ultra-short term, algorithmic based. "Swing trades" are executed, but not as a primary strategy.

11. They add links to charities to "prove" they are nice guys, but the ultimate intent is to sell based upon that. No, I'm not kidding on this. And while they might have a shed of good intent, the primary motive says otherwise. On a positive note, some people actually end up donating, but under a sick pretense.

12. They claim that risk management is virtually all you need to do well. This is similar to the psychology component. It is a crutch for a lack of systematic output.

13. They lack regulatory history. Serious traders are just that. They are professionals. They take FINRA examinations, join associations and get become registered as such. This is the definition of a "professional". You can't get a lawyer is he/she didn't pass the bar exam.

14. They talk about "key support and resistance" with the benefit of hindsight, claiming they took action on these levels.

15. Non-directional buzzwords used all the time: "big move", "volatility", etc.

16. From the marketing wheel, they game the networks: tons of social media accounts, buying followers, youtube views, buying positive reviews, buying likes, fake forum posts and setting up fake websites.

17. Use of phony backtests. It is easy to create a highly profitable strategy in dummy data. In a live environment, it crashes and burns.

18. They sell the lifestyle, not the strategy. No boss, fast cars, big houses and all the shrimp cocktail you can dream of.

Setting up a website, social media accounts, lying, and including a link to a PayPal address is much easier than trading.

I wanted to put this list here because again, most of you haven't seen what I've seen. Sadly, I see much of it here front and center on Steemit. Crypto has dragged in a whole new group of investors, and guys like me are rare.

I am not selling you a product nor telling you to do anything aside from watching your back.

If you like blockchain, buy technologies you admire for the long-term. DO. NOT. DAYTRADE. If you like the rush of dopamine, then go to the casino instead. At least you know what to expect, and the drinks are free.

Did I miss any? Let me know in the comments. Follow / upvote appreciated.

I was ready to leave Steemit the other day after seeing much of the above openly promoted on this site, but thought this would be much more fun instead. This a crypto-centric community and while much of these tactics have been touted on other channels for years, I feel the need to post a warning flag here for (hopefully) better visibility, but without bots, who knows. Hope you enjoyed.