Why Can Never Buy A Profitable Trading System

Back in 1986 Eddie Murphy was the hottest standup comic around and a group of friends and I decided to go see him live.  There was a palpable buzz going through the crowd that night that built into a climax as the house lights went down and Eddie burst out into the spotlight, leather suit and all.  He was full of energy, pacing back and forth along the edge of the stage like a stalking tiger, and then diving headfirst into his routine….

Hello Orange County, how is everybody doing tonight? (Wild applause).  Hey I’m sorry I was late getting out here, but I was watching a porno backstage.  It was wild, there was this guy sucking his own dick.  I mean is that crazy or what?  Man if I could do that I would never leave the house.  People would be walking down the street saying “Hey, what ever happened to that Eddie Murphy guy?”

My friends and I roared with laughter but then just as quickly, being the insecure teenage boys we were, cautiously measured each other’s reaction to be sure that laughing at an auto-fellatio joke didn’t make us “gay.”

The guy that Eddie referenced in his story was none other than the legendary “Hedgehog” himself, Ron Jeremy. Ladies if you don’t know who he is, Google him, and guys if you don’t know who he is….well then you are just lying.

   Who would have thought that this fashion choice would go out of style?

I was reminded of this incident while walking through the exhibit hall at the Trader’s Expo in Las Vegas.

The Trader’s Expo is a convention where companies that are part of the “business of trading” display their products and services to thousands of eager retail traders. For the most part I have no problem with these companies and what they do. They include;

Brokerages:  Until the time when retail traders can trade directly on the exchange’s servers (read: never) these are a necessary evil.

Data Vendors: Where would we be if we could not create charts and scans in order to find our next trade candidates?

Educational Courses:  Not as bad as you might think, and can actually be helpful if they focus on a risk oriented methodology.

Mentor Programs:  This is where it gets a bit douchey for me, but I can’t totally blow them off as I know traders who have benefited from them greatly.

Trading Services:  Nothing wrong with experienced traders running a service to give subscribers market insight and highlight potential trade setups.  I use a few of them myself.

Speakers and Authors:  As long as they themselves trade or have extensive experience trading then their presentations/books can be a wealth of good info.

No, the thing I have a fucking problem with are the companies and individuals that try to sell trading “systems”.  These snake oil salesmen have been around since the first exchange opened, tying to lure in new and unsuspecting traders with their promise of  a “sure thing”, and were actually prophesized by Nostradamus in one of his lesser know quatrains;

_______

From the Great Lucifer a false key to the merchant’s game shall come to be known

A “sistema” that consumes much gold & silver yet from which none ever emerges

Laying waste to the flocks of sheep who come to feed at its teat

And the red birds from a saint town shall take the ten plus one series in seven

_______

Well I am here, as a consequence of the “donkey” incident, to fulfill my court-ordered community service obligation and warn you to never buy one of these systems, as they are all complete bullshit.

So how do you know if someone is trying to peddle you a system?  Sometimes it as easy as looking at the person doing the selling, as the clip below illustrates.

Oh, karate kicks & saying “Kachingo” is how to make money in the market

Other times the venue in which it is being sold can give you a clue.  Legitimate companies advertise in media that is focused towards traders, so if you are up late one night watching reruns of The Golden Girls, and you see an ad telling you how you can “trade for a living”, you should probably drop the credit card and back away from your computer.

But perhaps the best indicator is if the product being sold professes to take all the discretion out of the trading process, automatically telling you where to buy and where to sell (implicitly making a profit in the process).

Hundreds of millions of dollars are spent by the likes of Goldman Sachs to develop algo, HFT, and quant trading systems, and they are constantly being modified as the conditions in the markets change.  The code in these systems is highly guarded and there have even been court battles when programmers have left one firm to go to another, as to what information they are allowed to disclose.

What this all boils down to is that as a retail trader, you will NEVER have the ability to purchase a viable trading system.  The costs to make one are too high, the need to modify it too intense, but more so than that, it is a self-fulfilling prophecy that goes back to the Eddie Murphy bit.

If you really had a trading system that automatically made you money, would you share the secret with the world by selling it, or would you just sit in a room all day long, doing the “Ron Jeremy”, and  auto-pleasuring yourself in the form of coining money?

Nostradamus – Mystic, visionary, scientist, & one bad-ass E-mini scalper.

Take my advice and use the “IKEA rule” when considering any trading related product purchases.  The IKEA rule is based upon the 75/25 ratio, meaning 25% of the stuff they sell is decent quality, you just have to get through the 75% of the stuff they sell that is crap in order to find it.

Look for the products that are “tools” for successful trading and then use them to create a methodology that fits your style and personality.  It is not as easy as just buying a system, but it will serve you better and improve your chances of being a successful trader in the long run.

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Brian C. Lund

Brian C. Lund

Great father. Good friend. Decent trader/writer. Lacking husband. Solid drummer. Sometimes funny. Often A-hole. Terrible poker player. Too smart. Punk rock. Work in an ice cream shop.

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