Chapter 4
Snake Oil

Snake Oil SalesmanFrom Wikipedia: Snake oil is a traditional Chinese medicine made from the Chinese Water Snake (Enhydris chinensis), which is used to treat joint pain. However, the most common usage of the phrase is as a derogatory term for compounds offered as medicines, with the implication that they are fake, fraudulent, quackish, or ineffective. The expression is also applied metaphorically to any product with exaggerated marketing but questionable or unverifiable quality or benefit.Sooner or later you’re gonna stumble onto the “trading rooms” and even worse, the “trading courses.” I call them snake oil. Another way to put it would be “pure 100% bull shit.” These rooms and trading courses are designed for one thing, to take your money from you. But, I will say this, there are a very, very few sites on the internet where you really can learn the basics of trading without paying thousands of dollars for so called trading courses.  I’ve already mentioned Trisha’s site for trading futures.  I can honestly say I never bought any snake oil but it’s not because I’m smarter than you. It’s because I was fortunate enough to have a private mentor who kept me away from such things. Thanks again Bob !

There’s a term you’re gonna keep hearing over and over, “the holy grail”. The holy grail is the magical indicator or trading system that will pop up on a chart and tell you when to buy and when to sell. All you have to do is watch your trading account grow by leaps and bounds ! I’m gonna let you in on a little secret here.. BULL F. S. ! There is no such animal but there are thousands of snake oil salesmen out there claiming that they have it. And you’re their target. Why ? Because you’ve tried everything and you just can’t win. No matter what you do you keep losing your ass. You’re desperate and they know it.

Snake oil rooms will start you out with a free trial lasting anywhere from 1 day to 2 weeks. This gives them enough time to get you interested and show you just enough to fool you into thinking they have come up with a system that can really turn your life around. They claim to have the indicator that no one else has. Or they have developed a system after years of data input and back testing that’s fool proof. I even know one guy who claims to have invented a system that can predict the future moves of a stock. I’m not going to tell you what he calls the system because you’ll Google the dang thing and buy it ! I’ve seen trading courses sell for as much as $10,000.  You buy the course and then they promise to spend the next 6 months teaching you how to use it. You get lifetime support and updates and blah, blah, blah bullshit. What you really get is a bunch of indicators that are readily available with any charting software package.  They may have changed some of the settings or added some new code but the bottom line is plain and simple, it’s snake oil, bullshit, fantasy, a scam or whatever you want to call it. Let me give you something to think about and if you ever find yourself being offered a course that cost thousands of dollars and promises you the moon, ask the snake oil salesman this question.. If you’ve come up with the “holy grail” system why are you offering it to me for a few thousand dollars when you could lease it to a big trading firm on Wall Street for millions ? Think about that for a minute. If I could come up with a set of indicators or some magical trading system that would tell me to buy here and sell there do you really think I would be spending my days on the internet with a bunch of newbie traders asking me ten thousand questions ? Heck no ! I’d be scooting around the Caribbean on a big boat with a skipper at the helm and a bunch of pretty girls.

There’s a new ad campaign on TV right now hawking a system that shows you buy and sell points with what they are calling trade triangles. One guy is sitting on what appears to be a yacht and then there’s another guy with his Benz in the background. They’re showing you their laptops with green triangles to identify up trends and red triangles for down trends. Un_freakin’_believable. If you can’t look at chart and determine if the trend is up or down you probably shouldn’t be trading just yet ! It seems like every day there’s a new ad on TV for the latest and greatest trading system that will show you when to buy and when to sell. Well, I hate to pop that bubble your floatin’ around in but it ain’t gonna happen, not now, not ever. The best dang trading system you’ll ever find is yourself. But it’s not gonna be in the form of red and green arrows and stars and triangles,etc. It will be you doing your DD, due diligence. Websters defines due diligence as: research and analysis of a company or organization done in preparation for a business transaction. You have to do your homework. You have to study charts, chart patterns, look for support and resistance, know when a company’s earnings are to be released, recent news that might affect the company’s share price, look for candle patterns, etc.

Let me talk here just a minute about charts and patterns. There are 2 kinds of traders, one trades TA and one trades fundies. The TA trader (no, TA doesn’t mean tits and ass) looks for technical signals or does technical analysis, TA. The fundie trader looks at the fundamentals of a company. The pour over balance sheets, income statements, PE ratios, earnings, cash flow, etc. These type of traders are really more investors than they are traders. Their price targets are months to years out where a TA trader’s target is usually anywhere from a day to a few weeks. If you’re reading this, you’re probably a TA trader.

Ok, I guess we’ll wrap up this chapter now. Don’t buy any snake oil, OK ? And don’t forget to use stop loss orders !