Learn to Trade or Follow Trading Room Calls?

I’ve been at this business of trading for almost 30 years now, and the business has gone through some tremendous changes in that period. The biggest change is, without a doubt, the influence of the internet and the establishment of e-mini trading rooms, e-mini educational programs and centralex a host of other developments related specifically to futures trading.

After retiring from institutional trading via an early buyout offer (nearly 8 years past), I began teaching individuals the principles of trading and running a small trading room. I like things simple so I always kept my trading room small and mentored every student on a one on one basis. Assembly line e-mini education just didn’t seem feasible to my way of thinking.

Early on in my second career of training individuals who wanted to learn to trade, there were very few trading rooms, maybe fifty or so. That is a simple guess from my point of view, as I never took the time to actually count the number of rooms in existence. Oddly enough, most of those rooms are still in business and succeeding.

One nice thing about my job is that I get to chat with a sizeable number of individuals wishing to learn to trade. Back in those days, fresh off Wall Street, I was a gruff old sort and didn’t care to befriend many of my room attendees. My attitude was to intensely train students and hope they could conceptualize the principles I was trying to convey. It’s a tall order for sure.

I still get to chat with a number of individuals wanting to enter the trading business on a daily business and I am a bit softer in recent years, able to relate to the problems facing fledgling traders.

But I’ve noticed a subtle change in what potential traders search for these days; they want to make money. This is a fine thought, by the way. After all, the end desire all competent traders is to earn a living in this business.

But things have changed, especially in the last year or so… a large number of the inquiries I receive are not concerned with learning how to trade, but looking for a trading room where they can make money. Many of the potential traders I chat with are simply disinterested in the lengthy process of actually learning to trade; this process can anywhere from 3-6 months (by the hardest working and naturally talented individuals) to several years. (for individuals who have to work a little harder and trading does not naturally resonate with their thinking) Either way, I’ve had a lot of great students who have succeeded wonderfully and take pride in watching their success.

I don’t get many of those types of individuals anymore, and quite often the first question I receive from a potential trader is, “how much money can I make trading in your room?” I have observed this line of thinking accelerating in recent months, and more than half of the individuals I speak with have very little interest in learning to actually trade. No, quite often the new inquiries are centered on following trading room calls and mimicking whatever the trade room barker has set as his trade set-up.

While the rate of success of new traders is daunting, this approach to trading is something I find quite disturbing. Without the pre-requisite trading skills how can a new trader evaluate the merit of any trade room call? Instead of becoming traders, these individuals are depriving themselves of the lifelong journey of learning to trade. They make themselves drone-like, and follow whatever commands a trade room caller initiates. Many of these individuals I speak with have joined 7 or 8 trade rooms with varying levels of success, but they always seem to be jumping from room to room looking for that one room that will cause them to hit pay dirt. With very few exceptions, most have lost money. I usually try to explain that learning to trade would a better idea and they could trade independent of a trade room. With very few exceptions, that idea is met with skepticism, as most of these individuals simply don’t have the time or don’t want to spend the time to learn to trade.

This is a disheartening trend. We try to use my little trade room a laboratory for new traders to learn how the market moves, how even the best set-up can end in failure and a host of other emotional and technical factors that all contribute to the process of becoming a competent trader.

I have looked for an explanation to this problem; perhaps it is the recession and new traders are trying to make money fast; trading is, of course, definitely not a get rich quick scheme. Maybe this trend is just a sign of the times, and trading educators are becoming dinosaurs. Whatever the cause, trading rooms are great places to test and fine tune your trading knowledge; of course, if have very little technical trading knowledge, trading rooms seem to be a disastrous experiment in making money. I hear this story from other trading educators with whom I have befriended over the years so I don’t think I am alone in this observation.

There is no way any trading room can say with any certainty how much you can expect to make on a given day. All traders go through periods of time when they are very “in-tune” with the market and other times when they just don’t get it, myself included.