How to Identify People Who Are Trying to Scam You

Trading seems to be one of the few industries where the less information someone gives, the more people seem to think they know what they are talking about.

If you’ve spent any time on any of the major trading forums, you’ll see that often the people who are most respected as trading “gurus” or people who give the most knowledge actually say the least.  I don’t mean their posts are short, although sometimes that is the case, but I mean the amount of actual, quantifiable, useful information they give is very small.

Trading “gurus” seem to realize this and know that they can string people along by giving them a little info and often phrasing it as a riddle or some other nonsense.

It makes no sense.  If you asked your math teacher a specific question and their reply was “what do the numbers tell you to do?” do you think that math teacher would still have a job next year?  Of course not.  All their students would fail.

If your GPS gave you some overly complex gibberish instead of saying “turn right in 0.3 miles,” do you think people would continue to buy that model of GPS?  Of course not.  They would tell their friends “dude, this brand sucks, don’t buy it” and that company would go out of business.

If you bought a complex piece of technology and the instructions said “hook everything together so it works,” do you think people would be happy with that product?  Of course not.  They would take it back and buy another one that wasn’t such a pain.

But for some reason, people who are trying to learn how to trade are satisfied with non-specific instruction.

Perhaps they think it’s because they think real life is like a 70’s kung fu movie where the master speaks in riddles and the student, after lots of hard work, suddenly “gets it” and can defeat his enemy.  After all, “kung fu” translates into “skill developed through hard work.”  And technically you can have “kung fu” in anything if you’re good at it after having practiced it for a long time.

On that note, one of the other areas where students are content with vague answers is the traditional martial arts world.  Hang out in a school long enough and you might see that the instructor never spars with his students (he’s “too deadly,” after all), the students never spar with each other or compete in tournaments (they’re told what they learn is “too deadly for the ring”), and the instructor might never quite be specific with anything because, you know, his students might find out that he can’t actually apply what he teaches.  You’ll also see this at those schools where they claim to teach you to knock people out without even touching them (funny how it only works on their own gullible students but not on resisting opponents).

Not coincidentally, these students often lose street fights because they never actually trained against a resisting opponent but they have a huge amount of false confidence because they actually think they are super deadly.

The other area where this seems common is seminars where they teach you to invest in real estate.  Although I’ve never been to one, I’ve been told that the instructors don’t actually practice what they preach (imagine that), and instead make their money through high priced seminars and courses.  I’ve been told that the “instruction” given in these is not specific enough to actually help with anything and that they just try to upsell more expensive garbage.  I’ve also been told that some of the methods taught aren’t even legal.  Again, I don’t know anything about that, but it’s not surprising.

So back to these long threads by the trading “gurus.”  Why are they so long?  Because noobs think these people being all vague actually hold the answers.  But you will notice that none of these “gurus” will  ever:

– make real time calls

– post specifics about their method

– answer questions directly

– post verified or notarized account statements

Making real time calls would let everyone see if you could actually trade or not.  Can’t do that!

Posting specifics about their method would let people actually test the method which would reveal if it was profitable or not.  Can’t let that happen!

Answering questions directly might cause them to accidentally give away enough specifics so that people could test their method.  Can’t have that!

Posting verified account statements would actually be a bit of a pain, but if someone is claiming to teach a profitable method, the onus of proof is on the person making the claim.  This should be especially true if someone is charging for their instruction.  Why would you pay money to learn from someone who hasn’t shown proof that they are a profitable trader?  And to go back to an example from above, why would you pay for instruction from someone who claims to be able to teach you to knock someone out without touching them if they haven’t shown they can do it?  Do you just take them at their word?  The onus of proof is on the person making the claim.  If someone could even demonstrate this skill against a resisting opponent one time they would have thousands of students from all over the world willing to pay to learn their methods.  Similarly, if any of these trading “gurus” could prove that they were actually profitable traders, they would have more students than they knew what to do with.  Of course, if they were actually profitable traders, they wouldn’t need to sell courses to make money.

Instead you will see a lot of:

– vague descriptions

– overly complex descriptions to specific questions.  Instead of saying something like “enter when price does this,” they will take 3 paragraphs and talk about all sorts of things using buzzwords they made up but never defined and circular logic, thus making it impossible for anyone to actually get anything useful from their answer.  However, it’s all set up so that on the surface it looks like you got a good, detailed answer.

– blaming the student.  Did you lose money trying to trade my method?  You must’ve done something wrong.  Reread my posts and try again.  All the answers are there, grasshopper.

As I have said before, the number one rule when trying to learn something is this.

Ask a specific question?  Get a specific answer.

If you ask a specific question and do not get a specific answer, it means one of four things:

1) the person misunderstood your question.  In this case, ask one more time.  Perhaps rephrase the question.  Misunderstandings do happen.

2) the person is BS’ing you (and therefore has no method to teach you, and therefore cannot give you a specific answer, and therefore you cannot learn from them)

3) the person doesn’t want to teach you (and therefore you cannot learn from them)

4) the person is unable to teach you, even if they themselves have shown demonstrable proof that they are successful at what they are doing (since they are unable to teach you, you cannot learn from them).

A special note about number 4: it is often the natural inclination of someone who wants to improve at something to seek instruction from those who are the best.  Often the person who is the best at something had a natural ability at that thing, anyway, and may be unable to tell others how they do it.  If something has always been easy for someone, they may not even logically understand the difficulties that other people may have with it.  I have known a few people who were very skilled at certain things yet completely unable to explain how they did it.  They “just did them.”  The best teachers are often the ones who developed skill after a lot of struggle as they can relate to the difficulties others may have.

So of those 4 situations above, 3 of them mean you are unable to learn from the person, so move on.

There’s No Such Thing As A “Trend”

How many times have you heard “the trend is your friend”?

Ask 10 traders how they define the trend and you’ll get 10 different answers.  Let’s go over some of the common ones:

1) The trend is a series of HHs and HLs.  Really?  How many?  What if there’s a LL somewhere in there?  That happens all the time.  It also assumes that if there are HHs and HLs that price will continue to keep making HLs.

not an uptrend

Not an uptrend


2) The trend is determined by the slope of a moving average.  Sometimes you will also hear this as “the trend is determined based on whether price is above or below a MA.”  These are the same thing because with almost every time of MA, if price is above it then the moving average is going up, and if price is below it than the moving average is going down.  The only exceptions to this are some of the stranger moving averages that use weird calculations and also sometimes you might get a calculation error depending on the software you use if there is not enough data (like if you  scroll all the way to the left of your chart), but this is all beside the point.  In any of these cases, the “trend” will then be based on the moving average type and period you chose.  Some people think a 20 period EMA (exponential moving average) is significant.  Some people think a 200 period SMA (simple moving average) is significant.  But your 200 SMA might be going up and the 20 EMA might be going down.  Then were is your trend?

wheres the trend

Where’s the trend?

3) Based on some indicator.  Don’t even get me started on this one.

Trends only exist in hindsight.  You can look at a chart and tell if price was trending up, trending down, or chopping.  But in real time you cannot tell.  How do you know where the trend begins?  How do you know that once you say “ok, we’re in a trend now” price isn’t going to immediately reverse and go back down the opposite way?

big uptrend

This is obviously an uptrend but we only know that in hindsight.

Check out that chart of SPY.  It’s obviously an uptrend, but did you know in March that it was going to keep going up?  What about now?  Is it going to keep going up?  It’s in an uptrend so it should keep going up, right?

Have you ever met a profitable trend trader?  I’ve seen lots of people selling courses and books about trading with the trend but I’ve never seen any of them make real time calls and be profitable.

Sometimes people will try to apply the laws of physics to the market.  You’ve heard the saying that “an object in motion remains in motion, and at a constant velocity, unless acted upon by a force.”  They’ll use that same saying to try and explain why trends exist in the market.  lol.  I mean, I guess a change in supply and demand could be “a force” that will change the motion of the market, but without knowing when that will happen, it doesn’t do us any good.  Look at that SPY chart again.  It’s been going up for a while.  Is it going to keep going up?  When is that force going to come?  I have no idea.  Neither does anyone else.

A “trend” can only be a real thing if a) you can define it, for example “one bar ago we were not in a trend but because price did a certain thing, as of this current bar we are now in a trend,” and b) that actually has any significance on its future behavior, for example, “because price is now in a trend (although it wasn’t one bar ago), it will now continue to go in the same direction.”

If you can define a trend in real time and use that to trade profitably, then keep on doing what you’re doing.

Why I Don’t Add To Winning Trades

As you know, I trade by adding to my position when price goes against me.

Most people say you’re not supposed to do that.  Here is where I point out that when I add to my position, I do it with specific risk tolerances rather than haphazardly adding as long as price keeps going down, which is a good way to lose all your money.

Adding to a position brings the average cost closer to the most recent add.  For example, if I go long ES at 1,000 with 1 contract and then price decreases to 995 and I add another contract, my average price is now 997.50, which is closer to the most recent add.  The more you add to an open position, the more price moves closer to the most recent add.  For example, if I have one ES contract long at 1,000 and price decreases to 995 and I add 2, my average cost is now 996.66, which is closer to the most recent add than it was when I only added 1.

When you add to a losing long position, your average cost decreases which means it only takes a smaller movement for your trade to turn into a winner.

But when you add to a winning position, that means it takes a smaller move against you for your position to turn into a loser.

Let’s assume price is trending upward and is making a few pullbacks along the way, making HHs (higher highs) and HLs (higher lows).  If you were long at the start of the trend and then added to your position at each pullback, it would look like this:

adding to winners 1

That is an ideal situation, but let’s assume for now that that’s what happens.

The green lines are buys and the green circle is selling your entire position.

If you could trade like this, you’d have a nice winning trade.

But let’s look at what is happening.  When you first open the position, your average cost is right at the first entry point.  No problem.

When you add the second contract, your average cost has now risen.

The red dash shows where your average cost is after each add (this assumes you start with one contract and add one contract at each buy level):

adding to winners 2

Now that’s fine and all if price keeps going up, but what if it doesn’t?

How do you know that each of those pullbacks is just going to be a LH and that price isn’t going to keep going down?  When you’re looking at the hard right edge of the chart, can you tell?

adding to winners 3

If price doesn’t keep going up and instead keeps going down, your previous winning trade has just turned into a losing trade:

adding to winners 4

In that last situation, if you hadn’t added to your winning trade, it would still be a profitable trade as price is still above your initial entry point (and average cost).

Adding to winning trades is only profitable if price keeps going in your direction, and a small movement against you can turn your winner into a loser.

I’m not saying it’s wrong.  If you can make it work for you then you should keep doing it.  I’m just explaining why I don’t add to winners.  Since I cannot predict direction, I have no idea if that pullback is going to be a pullback as part of a bigger trend or if it’s the beginning of a bigger movement in the opposite direction which would turn my winning trade into a losing trade.  I have also never seen anyone who can tell in real time if a pullback is a LH or the beginning of a downtrend.  I’ve seen a lot of gurus post after the fact charts where everything looks all perfect, but I’ve never seen a single one make a real time call.  In fact, this is a good way to tell if someone who claims to be a trading instructor is scamming you or not.  If they only show you after the fact charts and cannot demonstrate in real time that they can trade profitably, then they are probably scamming you.  If they show a chart and say “add here on the pullbacks” without explaining how they knew they were just pullbacks and not the beginning of trends in the opposite direction, they are scamming you.

Refer back to this image:

adding to winners 3

When you’re in that position, can your “guru” trade instructor teach you how to tell if that’s going to be a pullback (in which case you should buy) or if it’s the beginning of a down trend (in which case you should not buy)?

Sure, he can post after the fact charts like the first one I posted in this entry, but after the fact charts don’t help you.

Why I Don’t Trade Forex

99.9% of people (small retail clients) lose money in Forex and the ones who say they don’t are lying or trying to sell you something.

Here is a quick EDU on why you shouldn’t trade Forex without doing your research first:

1) it’s an unregulated industry. This means your broker can screw you over and you have no recourse.  There are some honest brokers out there, but there are also some dishonest ones.

2) since it’s unregulated, brokers can make their own rules. One example of this is fake liquidity pools. When you trade stocks or futures, you are trading against everyone else. When you trade Forex, your broker can set it up so that you are only trading against other clients of that brokerage. The bid/ask (prices) that you see may not be the “real” prices: they are the prices created by the broker for you. You’ll also notice that while stocks and futures show you the volume for each bar on the charts, Forex never shows any volume. That’s because Forex is not one big game for everyone to play. It’s a bunch of small games played by scam brokers.  Of course, they will never admit this, so I encourage you to Google it and learn more.

3) many Forex brokers also take positions against their clients. Since 99% of people lose money, your broker is betting on you also losing money, and they’re taking the opposite side of your trades (so when you lose, they win)

4) on that note, Forex brokers will go “stop hunting.” Say you have an order to sell if a position goes against you by a certain amount. Since Forex brokers can use fake liquidity pools, they can move the bid/ask to hit your order, thus closing your position for a loss even if price never actually went that far. And since they are taking the opposite side of your trade, they just made money while you lost money. Let me give you an example of this using stocks so you can see how ridiculous it sounds. Ok, AAPL is trading today at $520. Say you buy some, but you put in a stop order at $500 in case price drops that far and you want to get out. So you’re sitting there watching AAPL, and suddenly it hits $500 and your order is closed and you lose $20 per share. But the stock price never actually hit $500, your broker just lowered their own price of AAPL for a moment to trigger your loss. Obviously stock brokers can’t do that, but Forex brokers can.

If you want to trade currencies, trade currency futures. Futures is a regulated market and no one can screw you over. The down sides to futures are that there are minimum sizes and they force you into using leverage which, if you are a small trader, might be more than you are comfortable with.

If you want to trade Forex, be sure to do your research and find a reputable broker.

Trading is hard enough without having to deal with shady behavior from your broker, too.

After The Fact Charts Are Useless

I’ve never seen a fib trader explain how fibs will be used beforehand.  I have seen plenty of scammers posting after the fact charts, though (of course they only post charts when it happened to work and they never post or acknowledge the losing trades).

I’ve seen tons of after the fact charts posted, and even I will admit that sometimes price reverses EXACTLY at one of the fib levels (of course, sometimes price also reverses EXACTLY at random, non-fib levels).

But I have never seen a fib trader say “ok, price is going to reverse at 38% retracement here” or “we’re going to hold onto this counter trend position until the 62% retracement because that is our target profit” ahead of time.

That is what makes this method different. Every single trade is mapped out exactly before hand. Enter here. Add more here. Add more here. And then it’s usually either stop loss here, or take profits here.

I am saying that it is impossible to know what price will do ahead of time. Therefore, if price reverses at or in between any of the fib levels, I will make money.

That’s the only way to do it.

Prove me wrong. Show how fibs have predictive power and I will buy your system.

More BS From The Gurus

Fib gurus will post after the fact charts. In one of them, price retraces to 38% and they say “look! Price retraced to 38% and we bought there!!!” In another one, price retraced to 50% and they will say “look, price retraced to 50% and we bought there!”

My whole point is that ahead of time, they had NO IDEA where it was going to go. On the second chart, they didn’t know that it was going to go past 38% down to 50%. And on the first chart, they had no idea it was going to reverse at 38% and not go down to 50%.

I don’t know if it is going to reverse at 38%, or 50%, or 62%… or 27.5%, or 36.349287%, or 95.11111%, or anywhere else.

I do average down starting at 38% down to 68%.


Avoiding Scammy Gurus

Fibs are dumb and so are the doublespeaking gurus who teach them. There is no logic behind suggesting that they get applied to the finacial markets.

That being said, this thread demonstrates the only way to trade with fibonacci lines in a straight forward manner. There are no BS excuses, no double speak, no after-the-fact BS explanations of why price reversed at one of the lines one time and another one another time. Before you even enter the trade, everything is exactly mapped out: your entries, your stop loss, and your profit target. Surely as a confused trader you can see why that is infinitely more useful then the slippery double speak BS spewed forth by other “gurus.” Have you ever tried to read a post by some of the gurus explaining their methods?  It’s a bunch of doublespeak, confusion, and overly-complicated crap that doesn’t even make sense, and if you quesiton them on it, they get ultra-defensive (which is textbook scam artist behavior).

This site is the opposite of that. There’s no doublespeak. There’s no ambiguity. There’s no BS. There’s no riddles. There’s no after-the-fact excuses.

To be honest, this method would work even if you used other levels instead of the fibonacci levels, the only difference is I wanted to give fib traders some hope so for this thread I chose to use the levels they love so much.

Put another way, it has nothing to do with the Fibonacci levels.