In the space of the last few months I have teetered back and forth between feeling negatively and positively about my abilities and future performance in the trading world shortly ahead for me.
When I came across Tim Sykes's material I got a rush of inspiration. I ordered his DVD
How to make Millions. I hated the idea of trading stocks, but thought to myself
"If this is the way to make money, I need to overcome that and do this."
I began to feel negative about Forex trading due to Tim expressing his negativity about it. It really threw me off. So I put the majority of my efforts towards learning his methods of stock trading.
In the last few weeks I have had a lot of time to digest things and I have also come across a man named
Jason Stapleton on YouTube. He is a professional Forex trader and has some really excellent free material. I mean top notch no bullshit instruction. Consuming his material with lots of focus centered me quite a bit and allowed me to focus on some things. Some things I had forgotten, and some things I hadn't yet realized. Here are my thoughts:
Tim does indeed have a pretty awesome strategy. It not only makes sense, but is most importantly available to pretty much anyone who can open an account and start trading. If you are disciplined and do as he says, I believe you will over time make money. The biggest benefit of Tim's strategy in my opinion, is that it is quite predictable. Shady companies that pay promoters to pump up the stock price always fail eventually. In all honesty however, I feel that is where the advantages of his methods fall short in contrast to trading Forex.
On what will seem like a total side note, a long time ago I purchased a Trading robot from Rob Booker called
"the Mouse Trap". I became interested in it after hearing Rob and his friend Chris Davison talk about it in one of his very early podcasts. I purchased the robot and backtested it in Metatrader and sure enough, it would turn a $10,000 deposit into millions over a period of years. Upon Seeing those results I had decided to leave my desktop on at home with the robot running to see how it did with live trading. As the numbers suggested, it only won about 15% of the time. I let it run long enough to lose a lot and then one good winner brought it back to where I had started it. Shortly after that, I decided I wanted to have my computer on the road with me so I took it along. Being that I couldn't keep that computer connected to the internet 24/7 I no longer ran the mouse trap, and thus eventually forgot about it altogether and began later on focusing on using the other robot I bought from Rob,
"the Box".
Anyways, watching Jason's videos happened to remind me of a
very critical element in the trading world: Statistics. More importantly,
statistics derived from back testing. You see, when a methodology has very strict rule based entries and exits, it's performance can be repeated again and again through back testing and also applied to "forward testing". That is where Tim's strategy fails. Yes he has a track record of profitability, but it's
his track record. And his entries and exits are based more on guidelines than strict mechanical rules. His track record is a direct reflection of his personal experience, which is entirely unique to him.
With the mouse trap, each entry is rule based and uses no subjectivity whatsoever. I was reminded of this while watching Jason's video about what he calls "The 2618" trade. I won't get into the details, but in the two and half hour video he shows you the precise rules for entry and exit that leave no room for subjectivity. He then shows you exact statistics that system has produced over a 12 month period.
That is what I needed.
I needed numbers. I needed results. Why? Well, in another video Jason made the point of exactly why I needed them. Statistics give us a basis for belief, which when built to a level of
certainty causes us to take
massive action. Massive action then produces
massive results, which again feed our beliefs. I am a person that has always taken a level of high action when I believe in something fully. Remember the network marketing company I maxed out my credit cards to be a part of? I spent that $3,000 because I had a statistical number I believed in, and that was a very small number. They had found that only about 3% of people responded and that was enough to get me thinking massive and acting massive.
The fact that Tim only provides guidelines effectively hampers one's ability to gain concrete back-tested data to build certainty on. I have a few other points in mind that I wish to express as well.
Anytime Tim speaks about leverage, he always speaks negatively about it and usually attaches Forex trading along with it for a group scalding. What I need to say is that Tim is always reminding us that penny stocks are the only financial instrument he knows of that moves 50% in a day, which is why he tauts it as the best way to "
get rich". The point I want to make is that the leverage in Forex allows the currency market to basically scale it's gains and losses to that of Tim's penny stock realm. With that said.. Yes, yes, leverage can be dangerous, but so can any financial instrument in the hands of the uninitiated.
As I digested Tim's material internally while simultaneously taking in Jason's material, it began to become clear to me what had happened in my heart and mind. The same thing that happens to all who lose their personal sovereignty at the words of a
Guru: You begin to believe without question what you are told. Here is Tim, a very successful trader worth millions, showing you exactly how he made his millions, telling you with authority that Forex trading and using leverage will get you essentially nowhere but owing your broker money. A light bulb came on over my head. Tim spoke so negatively about Forex trading because all he ever heard about was people losing money. He had always been obsessed with Stocks and hated on Forex without experiencing it for himself. Had he been successful in Forex, he'd probably be hating on stocks just like I did before I took the time to understand how they work. It doesn't matter who you are, or how much you know about your specialty... Your authority only covers what you yourself are an expert at. As a truck driver I have come across people who
only drive trucks, that sit there and try to convince me I can't do what I do on my street bike, even though I do it all the time. I can't tell you how many people I have come across that have spoken with authority about things I
can't do, that I have already done successfully. I simply realized that Tim was no different than someone telling me I'm going to destroy the transmission in my bike because I don't shift with the clutch. They don't know shit about what I do or how it works, and unfortunately, neither does Tim. In fact, Tim mentions over and over again throughout his materials, his ignorance of the Forex market. I am not bashing Tim about any of this, just expressing what came to light in my mind about it all.
So, aside from the Leverage issue, There are some other comparison in which I am now starting to feel that penny stocks are not as great as I initially thought. There is a long list of issues that may make mechanical Forex trading look much better by the end of this.
First of all is the giant setback of what is called the
Pattern Day Trader Rule, which restrict anyone who has less than $25,000 in their account to
only 3 trades per 5 day rolling period. Which ultimately limits you to two trades unless you plan on holding that third position until you can legally exit it again... With Forex you are free to trade as many times as you want.
A large part of Tim's strategy when playing pump and dump stocks, is going short. Well, if you plan on shorting a penny stock, you first have to reserve shares to short otherwise you risk missing the trade altogether. Secondly, for any stock below $2.50 you still have to put up collateral for that stock as if it were $2.50 anyways. Want to short 10,000 shares of a $.10 stock? Although the value of that trade is only $1,000 you'll need to have $25,000 in your account just to put the trade on. In Forex you trade whatever your account will allow you. After that issue is the short stock restriction. If the stock falls 10% on the day you can't short the stock unless it upticks first. In Forex you can short at any time the market will fill your order. Lastly is liquidity. In penny stocks, a lot of the volatility produced comes from the fact that there are very few shares to trade at times. I won't go into numbers, but the shift from penny stocks to the Forex market is literally going from one of the least liquid instruments to the most liquid instrument on Earth. For those of you who don't understand liquidity, liquidity refers to the ease of which you can enter and exit a transaction. Real Estate is very illiquid, the majority of high priced stocks are very liquid, and the currency markets are the most liquid. The larger position you transact, the more liquid you want your market to be, otherwise you suffer what is called "Slippage". That is when the market's supply cannot meet your demand and the price changes out of your favor until enough supply is met to fulfill your demand. I could explain in depth but now is not the time.
I truly love what Tim does. I am not knocking it in anyway and I am in fact glad I purchased his DVD. It's taught me some valuable things and I can carry that over to other parts of my trading. Well worth every penny and if you love stock trading you should go buy it.
It however as I've mentioned previously, does not come with built in predictable metrics you can build belief upon. You must first adhere to guidelines as best you can until you produce enough results to analyze for yourself. This can take an enormous amount of time, an amount that can hold many back. I am sure if someone had the time and interest they could create a set of strict, non-subjective rules regarding Tim's system and go backtest it for solid statistics, but I don't think that will even enter the minds of the people he is reaching because he doesn't think or teach from that frame of mind at all. I think the belief generated in the minds of his students comes mainly from testimonials of other successful students. The ones who have applied serious study and application of what Tim teaches and made it personal for themselves as much as Tim has made it personal for himself. I have simply lost interest for the time being as I need more to go on that other people successes. I need numbers, and Tim has no way to provide them.
The Mouse Trap on the other hand... I just ran a backtest for the last 16 months and got real hard numbers. It lost a small percentage in that time, but in the last few years has made a significant return. But that is not what matters to me at the moment and it is certainly not why I wrote this post. What matters, is that I know what I have to do. I have to stick to numbers, because I am a person that needs belief to act. I had so much doubt in myself since the inception of this blog, even with the incredible success of the robot in the early posts. Yes, I was kinda building a database that I could look back on later, but it was based on random feelings. There were no objective rules in place that would make any of that duplicable, just a hunch that over the long term I would make money. I still have that hunch, but I don't want fucking hunches I want belief.
So when I get home and have legitimate time, I need to make rules that will allow success to be definable and repeatable with a system that fits my personality. I will explore Jason's offering of the 2618 trade and probably others he has for sale, but I'm most interested in producing numbers with my methods described in this blog. Preferably in a market with none of the restrictions that, to me, outweigh the benefits of an
eventual outcome.
