Reader Questions Answered

Why teach others how to trade?

A question came in this morning from a “fan” of The Essentials of Trading Facebook page. It speaks to a combination of topics, some of which I’ve seen a few places recently and all of which come up frequently in new trader circles. Here’s the edited question:

My question is simple… if your teaching of trading is successful, why tell other people ? I think a successful trade will not open his secret… and the rule of forex trading is if someone gains others lose. Sorry I just think that people invite others to trading, actually want them to spend their money and lose.

The question has a few parts, so let me address them separately.

Why share?
The first response I would have to this question is that there are millions of traders out there. They operate in all different markets, trade the full spectrum of trading time frames, and use more different strategies than could be imagined, and are not all motivated by profits. New traders  tend to have blinders on, thinking that the whole market operates in the same time frame and market they do, with the same motivation.

Consider this. Some traders are scalpers getting in and out in minutes, if not seconds. Some trader are market makers, not looking to play direction, but rather to buy at the bid and sell at the offer over and over again. Some folks are day traders, while others are swing traders, and even more are position traders. Some folks trade spreads between two or more instruments (long one, short the other). A large portion of the market (especially in forex) is related to hedging, which is something with no profit motive at all, but is about protection.

My point is that I could tell tens of thousands of people the exact same thing and not have it impact my own trading or what happens in the markets at all. Traders, especially on the retail side, are way too paranoid about this sort of thing. If you’re talking about a strategy which is used by big money managers then maybe we have a different story.

Zero sum game
While retail forex trading is generally speaking a zero sum game, when you start talking about actual foreign exchange transactions when currencies are really swapped for things like international trade then it isn’t. At that point it’s more like the stock or physical commodity market (as opposed to futures, which are zero sum) where you can have longs without shorts. See my earlier The Zero Sum Game post.

Why would a successful trader teach?
As for the question of why someone who is making money in the market would bother teaching, I will refer you to the Those Who Can’t Trade Teach and Why I do this trading education thing posts.

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