Episode 283: Don’t Ever Listen to Anybody Unless You Can Back Up Their Performance

by robbooker on August 25, 2014

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In Episode 283 of The Traders Podcast, you’ll hear your host, Rob Booker, respond to a post he saw on Facebook that drove him bananas… Rob talks about the problems with promoting articles written by someone whose trading performance you can’t see. He quotes Ray Dalio who says you should never listen to anybody unless you can back up their performance. This is all a prelude to Rob’s vehement disagreement with most of Mark Douglas’s Top 10 Trading Errors. It’s a spirited, good time. Leave us a comment; let us know your thoughts. Thanks for listening.

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{ 7 comments… read them below or add one }

Jon Donley August 25, 2014 at 6:14 pm

Class,… kicked the sh*t out of my reading list but I really enjoyed that. I like combative Rob.

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Matt B. August 25, 2014 at 10:59 pm

Way to go Rob. I have read Trading in the Zone, several times, definitely some tidbits in there. Having said that, it reads like my high school essays did when I started out with a set number of words required, and tried to fill up as much space as I could with as little content as possible. I am SICK of the endless flow of trading platitudes and contradictory advice about everything related to the business. I have done my best to rid my inbox of this drivel, but it just keeps on coming. The stuff you have been sending lately is just pure positivity and confidence-building material, which doesn’t hurt or confuse people. I think those of us who have made the journey to profitability have realized that our own trade decisions and trading methodology are things we need to take complete ownership of and responsibility for. Not just to say it, but to discover what works through experience (regardless if you learned it, created it or a mix of both), and to not be afraid to bend rules from time to time and do what you feel is right in a particular trade. That has been what has saved me from the big drawdowns I used to experience when I traded completely “by the book” never breaking a rule, and losing a dozen trades in a row. And you know what, it usually worked out in the end, but the journey SUCKED. Now the journey is AWESOME.

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Brian F. August 26, 2014 at 10:42 am

Dear Rob,
For once, I’m speechless. Nah, you KNOW that’s not true. This is either evidence of what happens to Rob when the calming influences of Jason are absent, or Rob had an accident involving gamma radiation (“Rob Smash!”).
IMO, you are countering Mark Douglas’s generalizations with other generalizations (changing the subject), which is ok, but also arguing specific exceptions to his generalizations, which is unfair. This is why I don’t argue with my wife, she’ll just ignore my logic, talk over me, or change the subject (comes with the chromosomes, LOL). I don’t have a problem with what you said, or with what Douglas wrote, they are not mutually exclusive. That’s the problem with trading, it’s highly conditional, and what’s true often relies on the context. For example, you said that you shouldn’t define a loss because every trade is different. That’s true, but you are looking at how the trade is handled, I could make a good argument that Douglas was discussing money management. From a money management standpoint, my trades can’t be like a snowflake; they have to be the same so my journal will record standardized data, and because my account size limits what I can safely risk. For example, if I have a $100k account, I’m likely to place a stop in Amazon to limit my risk to $1000. However, if I choose to trade the riskiest penny stocks, I might have to lower the whole position size to $1000 and trade without a stop to deal with illiquidity and volatility. In both cases, the risk is the same, $1000, or 1% of my account. In this respect, you are also “predefining losses” when you rollover trade. You size down, and limit your losses to 5%, with the intention of trading your way out of losers. I don’t think you and Douglas are that far apart, just comparing apples and oranges.
I think the big take away from this episode is a familiar one we have discussed in the past. What is true and important to you as a trader depends upon where you stand. For example, new traders have trouble closing losers, and old traders have trouble holding winners. What someone needs in his top ten list of trader mistakes depends upon his level of development.
Trading Authors: True, there’s not a trading author out there with all the answers, but that led me to a different conclusion than linking trading results to authenticity. Nobody has all the answers, so rather than narrowing who I will listen to based on status, which hasn’t worked out well for most people, I’ve widened my nets to find what I need. I’ll listen to anybody. Jason once observed that there are a lot of analogies in trading which can help us in everyday life. I think it works the other way around too, which is exactly why we are interested in Jiro, Zen Buddism, Mat’s work restoring cars while thinking about trading, and Jason’s opinions on movies. It’s the thinking that makes the progress, not the trading. Trading is a lot like life, so everybody has something to say about trading, the challenge is to tease out those insights.
Trivia Question: Who was the greatest author on trading? Reminiscences of a Stock Operator is widely regarded as the greatest book on trading. Its author, Edwin Lefevre, who was a journalist, packed as much wisdom on trading as he could into its narrative. Most of that content traces back directly to the earlier published works of Lefevre, not Livermore. Livermore was a great trader, but for Lefevre’s purposes, he was perfect because he was a media star and a self promoter. He was chosen by Lefevre to ensure the book would sell, not for his insights on trading (The book industry hasn’t changed, has it?). Livermore was a lousy trader coach. If you don’t believe me, read his book. My point, for the purposes of our discussion, is there’s no evidence Lefevre ever took a single trade himself, not one. However, like Rob, he spent his whole life around traders, thinking and talking about trading. So I kind of have to disagree with Rob. I want a coach that trades, but I really don’t care about verified trading results. Use sports for an example, the best coaches aren’t usually found among the best players. The important thing in a trading coach is thousands of hours of experience talking about trading with other traders and thinking for himself. The actual trading is just the yeast that makes the cake rise. It enables the coach to sort what’s true and will work from what’s not true, and won’t work, but first you have to get the ingredients into your head. Thinking you are going to trade and find them all yourself is foolishness.
Bottom line, we are all responsible for exposing ourselves to as much as we can, and then taking what we learn, those raw materials, and turning them into something by doing the work of actually thinking about trading. Searching for someone with towering primate status as an author or trader to tell us what to think is just an excuse for laziness, and in light of the experiences of thousands of other traders, a good recipe for failure.

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ShonnC August 26, 2014 at 11:06 am

“Bottom line, we are all responsible for exposing ourselves to as much as we can, and then taking what we learn, those raw materials, and turning them into something by doing the work of actually thinking about trading. Searching for someone with towering primate status as an author or trader to tell us what to think is just an excuse for laziness, and in light of the experiences of thousands of other traders, a good recipe for failure.”– Brian F

Love this. Well Said. There is no quick way around a learning curve.

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RichardHK August 27, 2014 at 10:46 am

Yet another enjoyable rant Rob. Looking forward to the next one promised to be even more rantastic.

Ref your comments this time, could I suggest you change the tab at top of the Traders Podcast page to read “Don’t Buy Rob’s Book”? That would be consistent with your rant, right? 🙂

Keep up the mind-expanding podcasts. Not to be missed.

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ryan the standing on the back porch man August 27, 2014 at 2:54 pm

I thought rem of a stock operator was a dull read.

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Vodka Erik August 27, 2014 at 10:07 pm

The last 3 mins was so profound , it opened my ears and I also found comfort. Thank You Rob

Vodka Erik

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