If you’re starting out as a trader you’ve likely look at some trading signal programs, mirroring trading networks, or even just considered handing over your money to someone else so they can trade for you. The other option is learning to trade for yourself.
To save you some time, and hopefully get you off on the right foot, I want to candidly address these issues.
As it turns out, no matter which you go, you may not end up where you expected.
Money Management, Signals, Trading for Yourself — It’s All Trading
Whether you place your money with someone else or trade based on someone else’s signals….chances are you will still end up trading your own biases, opinions, and beliefs.
The only difference is what you are trading. When you trade for yourself, you are trading your own strategies and research.
When you place your money with someone else, or follow their signals, you are using your own money to trade their research and strategies. Ok, nothing new there. But there is also a second level of trading that goes when someone else controls your financial destiny—you get to control when you follow their advice and when you don’t. You can pull your money out of a fund when it is doing poorly, or you can stop a signal service because you don’t like the results. Then you can fire it up, or another one, any time. This can seriously mess things up for a lot of people! They end up trading the signal provider, hedge fund, etc.
Paying for trading signals seems easy…all you have to do is do what they say.
Or if you pass off money to someone else to manage all you have to do is…nothing. Great!
The problem is humans have a very hard time doing nothing, or even following a simple strategy that is sent to them every day.
Traders who learn to trade for themselves spend years developing the discipline to consistently stick to a strategy. That’s all trading is!
Yet, many people assume that if someone else tells them what to do they will miraculously be able to follow along with no problem. While this may work in some cases, the average person is going to do very poorly when trusting their money to someone else or following signals. They just can’t help “dabbling” or “tweaking” things a little bit, or maybe they skip a trade or two, or they pull money out of the fund when it is doing poorly only to miss the next up the swing.
Real Performance Versus Perceived Performance
Let’s set aside that most mutual funds, hedge funds, and signal providers are going to provide meager returns, if any. And in the case of signal providers, your risk of losing money is high…even if you follow their advice precisely.
Let’s assume you actually happen to invest in an amazing fund, or find an amazing signal provider.