If You Make So Much Money Trading…

In my internetz travels among other traders’ blogs and websites, especially the ones that sell some kind of service, I’ve often seen the complaint “If you make so much money trading, why would you sell education or software or indicators? If your stuff is any good you should be rolling in enough money to buy a small island!” I also share this view, to a point. However, there are situations I see where it does make sense that a trader that earns a living trading (I am not one yet, and may never be) should sell education, mentoring or indicators.

The obvious yet unverifiable reason that is usually cited for selling mentoring/education services is that a trader wants to “give back” to help others succeed. Many traders truly do want to give back, though there are also many con artists. You should NEVER give money to anyone without knowing what you will get beforehand; I certainly don’t myself. Of course, it’s also easy to argue that if you are going to “give back”, you should really give–for free. That’s something that I believe in, and it’s why I never have nor ever will make my blog private or have a private mentoring forum, for example. I teach and answer programming questions for free. I do charge for the products of my time and brain where I feel it makes sense (see “Teach for Free, Work for Fee“), which I see as a different matter altogether from education or “giving back”. I’m also not yet a successful trader, so I don’t have much to “give” in that department yet anyway.

But suffice it to say, I have resisted very much paying to receive trading mentoring or education for myself to this point. I have never been able to reconcile why someone who is NOT a con artist, or someone who is actually a successful trader would seek out my $xx a month to teach me. The only way to find good services that I could see was to find the real “good guys” and watch them for a long time, to make sure they knew what they were doing, and that they really cared about others. However, both are hard to do over the internetz.

Then, while thinking of all these ethical dilemmas to charging for trading education and services, I had a thought that sent me over the edge. I was always thinking of the question from the “educator” side of things–such as “why would a trader want to teach instead of trade if he was any good?” As I started to consider my own experiences in programming custom work for others, and comparing it to my struggling trading, I made the breakthrough:

Think like a trader.

As a trader, if you had a trade setup with a 100% win rate, with no downside risk, would you take it? How often?

As a trader, if you had an auto-trade strategy that would generate a fixed profit every day, no matter what the market environment, would you use it every day?

As a trader, if there was a stock that allowed you to make one winning trade that would then pay off every day for the next year, even if you sat on the sidelines, would you trade that stock?

I think any trader reading the above would instantly say two things: “Hell yes!”, and “What’s the catch?” These trading examples may not be realistic, but the math involved IS when you apply it to selling services! If you sell education, it’s like a 100% win rate trade. You give them access to your stuff, they give you the money. It’s not like you teach them and you might get stopped out! Also, if you sign someone up for your service, it pays day in and day out. If someone gives you $300 for a month of access, that’s $10 a day, whether the markets go up, down, or sideways. You even get paid on the weekends while you are on the golf course. Plus, if you make one sale to one subscriber, and they are happy and continue over time, it is the one trade that keeps on paying.

If I take a trade in the futures, I can shoot for 2 points of profit, and I might actually lose 2 points if I’m wrong. If I do custom programming for someone, I might make the equivalent of 2 ES points over an hour’s time, and I have no chance of getting stopped out or even losing money. Worst is breakeven if somebody doesn’t like what I did and I never get paid!

So if you are a struggling trader like me, but you have a programming or skill or teaching talent, it might make sense to sell some indicators or your time for the benefit of other traders. Even if you are an amazing trader that makes tons in the markets, you still have to take some risk on every trade. Why not hedge that risk and teach while you trade, collecting some extra income to offset any trading losses? It just makes sense, because it’s like taking a good trade setup.

All of this combined with my lack of progress has convinced me to actually *gasp* pay for some trading services. I’ve subscribed to the EoTPro indicators for a month. I’ll be trying their indicators out and joining their trading room at the market open as often as I can. If I can net at least 4.5 ES points in the month, then it pays for the subsciption.

Here’s hoping that this investment will pay off for me and get me out of scratchville and into net profit in 30 days or less!

8 Responses to “If You Make So Much Money Trading…”

  1. James Phua Says:

    i see your point, however, if a trader was that successful, he would make money he was happy with and go out and enjoy the rest of his day. thats just my opinion then again. lets say that service u ordered costs 300 bux with 100 subscribers. 30000 a month, is nothing compared to what a successful trader makes. if u add the additional hassle into making videos and promoting the site and generating more marketing techniques it wouldn’t really make sense for them to do that.

    in a link u provided some time ago, it mentioned about trading the statistical probability of ur win rate. so if ur constantly making 60% win rates, all u have to do is buy more contracts and it would automatically increase ur profits
    100% win rate * 6 (one contract trades) = 6 successful contract trades
    60% win rate * 10 (one contract trades) = 6 successful contract trades

    according to statistical probability, it comes to the same.
    so i honestly do not think it would be rational for a very successful trader to be selling systems and what not…
    i’ve made countless of indicators that i don’t use… i could easily rack up cash by opening a store that sells “junk” that keeps people coming back for the next “new” product because they hope it would work better than the last…
    but that goes against my ethical and moral values…

    just my 2c

  2. Eric Says:

    Welcome to the flip side. I too am an eot subscriber and look forward to your insights. Richard over at MTM is usually on (except Tuesdays) from 9ish to 11ish. Im Eric W in the room. See you there!

    Cheers!

    E.

  3. Prospectus Says:

    James,

    Thanks for your thoughts. As far as the 30,000 per month, that seems like a lot to me, but I’m not a successful trader and I don’t know how that number compares to what various traders might earn. You could be right on this point. I’d love to be saddled with this “problem”. 🙂

    On the increased trading, I do take issue with the underlying assumption:

    “If you’re constantly making 60% win rates”

    Nothing is constant in a game of probabilities. That 60% is historical. It could change to 20% overnight going forward without warning. Further, each trade may have a 60% chance, but you could easily have a string of 10 losses in a row with those kinds of numbers. Even assuming that the 60% was truly the probability and that it remained constant, you will still see a wild variation of returns within small numbers of trades (like the 6 or 10 trades you gave as an example). My Monte Carlo simulator showed me this, and it was eye opening to me. Plus, more trading under the same system is correlated 1:1 to the results. If you owned rental houses, that income is not correlated with your market returns, and is a hedging factor, rather than increased return in exchange for increased risk.

    I say this because in trading, with the small exceptions of arbitrage or fraud, nothing is guaranteed. Nothing. You take SOME risk when you trade. When you take on a subscriber, there is no risk of loss like in trading–you just get paid. So I don’t think that increased trading is comparable to hedging through other unrelated forms of income at all.

    As for the marketing of garbagio indicators or services, I agree that much of what is sold out there is not worth a dime. Some things that are given away for free are also worth exactly that. That is against my morality as well. You have to find somebody who is competent and not a crook, and that can be difficult.

    Hope you don’t feel that I’m busting your chops on this! I appreciate your thoughts and a discussion is good for thought, at least for mine. I hadn’t considered the angle of trading more contracts and how it would correlate with your returns, so I thank you for the idea. Hearing opposing viewpoints can only be good, because you will either prove your existing views more, or come around to a better way of thinking, IMO.

  4. Dogwood Says:

    I’ve been toying with the idea of selling some of my swing trading systems on a subscription basis for quite awhile for three primary reasons.

    One: I have more systems than I can reasonably trade in my own account. I have several consistently profitable systems that could be traded but are not being traded due to lack of capital. So, a subscription service would allow me to be compensated for the time I spent developing these systems.

    Yes, I could go out and raise capital to trade, but I spent a lot of years raising money from others in a previous life and I hate asking people for cash. Offering subscriptions would negate the need to beg.

    Secondly, I have come to realize over the last three years that I am a much better system developer than I am a trader, which is one of the reasons my ultimate goal is to automate some of my systems. In the meantime, sell the signals and make some extra money.

    Thirdly: System trading is boring. Running a subscription service allows you to operate your own business doing something you love to do while helping others advance their financial goals. I win, they win, all is good.

    Just my two cents.

  5. taotree Says:

    On the “give back” side…

    I think there is some basis to the idea that it’s guaranteed money so sell services.

    A couple more things I would note:

    1) Giving back for free isn’t giving back for free–it would be paying to give back. Which I don’t think you are suggesting they do. There are a lot of costs to offering the service these people do. It seems reasonable that even if they don’t make money, they would at least receive sufficient to cover the costs of doing business.

    2) Weed out the tire kickers. These people are experts. They have spent years and thousands of hours learning what they do. Would you really expect Tiger Woods to spend time with your (and everyone else’s) 6 year old child who’s having fun with his toy golf club? Many people who would join a free service are similar and equally as disruptive as that 6 year old child.

    3) I was with a mentor for a while. I then saw two people spin off of him and open their own offerings. I got the impression that at least in some cases, the people who really devoted themselves to trading were the successful ones. Devoted to the point that it’s what they did–it’s part of their identity. So, they open trading rooms because it’s who they have become–a trader. It’s become their lifestyle. They open trading rooms for it to continue being their life. They develop courses, documentation, videos, mentor others and in so doing deepen their own understanding. They collaborate with others.

  6. HR Says:

    Great discussion. I know a person who was a losing trader for years before disciplining himself around one method applied to only taking long trades on a triple leveraged ETF or its inverse (whichever was trending up). That’s it. That’s his simple specialty. Patton said, “A good plan violently executed now is better than a perfect plan executed next week.” He realized that sticking to one “good” set of indicators “executed with excellence” was more valuable (and much less time consuming!) than constantly searching for “the best” set of indicators (or equities) and never really getting GREAT at EXECUTING! Now, similar to what Dogwood mentioned, he’s become a disciplined specialist for his chosen set of signals and trading rules and … his success rate and returns have become phenomenal. Success has attracted people to him who want to know “his secret.” He makes huge money trading 5 hours a day and then fills the rest of his day training others for a fee. It gives him something to do, he’s good at it, he is “giving back” and … charging most people a fee automatically screens out those who are not committed. He also teaches his technique for free once a month AS A SERVICE (not to attract clients) at a trading group of Average Joe’s that meet every week. He has struck a good balance that works for him. Conclusion: strike a good balance that works for YOU between trading, teaching for free and teaching for fee. Enjoy whatever your balance is!

  7. Prospectus Says:

    Thanks, that was a good comment!

  8. Bob Says:

    Hi ive been trading 7 years, thanks for posting this ive been in a similar situation wasted a little money on buying services but can never bring myself to just hand over money in large amounts and this is why.
    To me it seems like automatically giving yourself a certain losing trade and handing money to the other trader (seller) without even having a 50/50 fighting chance of using your skills and study and programs.
    I see what you mean by how they see it as a winning trade, but that poses the problem of them not being sure of the risk of using their services they are selling.
    If they were so sure they would be able to take the trade without any discipline because it would be an always winning trade or even they would know the odds of their trading method/services/software were better than average and would be able to take the trades.
    In fact what ive found is most stuff sold actually has the same odds as flipping a coin.
    And that is why these sellers are selling it because their odds instantly become certain and they win the trade surely without any risk and no 50/50 odds by selling.
    This is why you should not buy what they are selling because it is not actually worth money.
    It is the same stuff you can learn from books and study and all the same software you already have and could have made for yourself.
    These sellers 99% do not trade live money, I mean come on why would they risk the sure fire money you hand to them on trading?
    Yet they lie and say they do trade live.
    These are traders who have given up, they have quit, and have now become common internet marketers.
    You could run some internet marketing services and trade, but I believe selling trading education and software and mentoring is a scam.
    It is taxing other traders, it is winning the trade from them like in the market but with 0 risk, its similar to something like front running.
    Except for the common book of course.

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