So why aren't these offerings more successful? If a successful trader is teaching methodologies to developing traders, why don't those traders come close to replicating that trader's claimed success? A common answer is that the aspiring traders need to develop their psychology as well as their trading methods. They are not succeeding because of their lack of discipline.
But what if we were to take the patterns taught by the gurus and automate them so that there is perfect discipline? Or what if we were to program the patterns and actually assess profits, losses, drawdowns, etc.? I've performed this exercise a few times and the results are discouraging. The patterns that are taught work in certain market environments and not in others, ultimately resulting in unacceptable drawdowns.
This makes sense. If drawing lines on charts and finding simple "setups" consistently made meaningful money, those would be rapidly exploited with those who have the funds and programming expertise to take advantage of the opportunities. When I first began working at professional trading firms, particularly large hedge funds, I was struck by the fact that none of the best traders used methods similar to those taught online.
None.
The professional traders understood *why* markets move and thus don't rely on charts and indicators that reflect movement but don't *explain* it. In this series of posts, I will make an effort to explain how professional traders learn trading and how we can learn from their example.