Wednesday, September 04, 2013

Learning a Very Valuable Trading Lesson

Learning a Trading Lesson by Dr. Van Tharp International Institute of Trading Mastery

One of the biggest mistakes I have ever made in my business as a trading coach relates to publicly promoting the trading performance of my Super Traders. During the 1990s, I asked the first set of Super Traders to make statements about how they were doing as they progressed through the program and posted those statements online.

I believed what they said as I assumed they would want more coaching if they were not doing well. In reality, however, I had no way of verifying any statements they made about their performance. I simply made the assumption that when someone tells me how much they have improved after I help them, that they were being honest. I ran an education company and had never been in a position to track the money the clients were trading. Why would they lie to me?

My big mistake was to never seriously answer that question for myself before the universe provided me with the answer. The answer was — someone would lie about their performance improvement under my coaching in order to attract more clients or more money through my public or implied endorsement.

I discovered this after one of the original Super Traders, with whom I had formed a very close personal and professional relationship, turned out to be a mini-Bernie Madoff with a Ponzi scheme that attracted nearly $50 million in investor money (rather than Madoff’s take in the billions). With the exception of the amount of money lost, everything else about them seemed very similar.

Some of the money this mini-Madoff managed came from my other clients because I was willing to relay what he wanted me to say about his performance. I talked about his performance even though I had no way of tracking it. I even had money placed with him. The news about his Ponzi scheme broke and the net result was that I settled a lawsuit against me— brought by clients who had placed money with him. In addition, most of our company’s retirement funds, which had been placed with him, disappeared. The incident nearly destroyed our company.

I vowed to never again endorse the performance of any of our clients. I now trade the company’s retirement funds personally and do very well with it. Never again would I consider putting any of it with our clients because I have no way of verifying their performance to my satisfaction. Consequently, when you read information about our Super Trader program now, you won’t see any track records or statements about how people are doing.

I do sometimes put client track records into my books as long as I can see no reason the person would make false statements about it. For example, in my book Super Trader, I showed the track record of someone who had an SQN® score of 15 in a particular Forex trading system. He never asked me to mention his accomplishment and he seemed sincere in communicating his gratitude for what he had learned from my materials. I didn’t mention his name in the book so I was not that concerned about his/her performance records being inaccurate or about him benefiting from the mention.

In my new book, Trading Beyond the Matrix, I did mention the performance of some people who wrote chapters for section 1 of the book. In each case, I was very careful to avoid implying that anyone should put their faith in the performance of one of these people; that’s always dangerous. However, it turns out I did make one mistake; one of the Super Traders wrote about his track record and I allowed him to mention his new coaching web site.

Trading Beyond the Matrix has been out since February and I recently learned that some of my potential clients are using his coaching program in place of the Super Trader program. However his coaching program is not my biggest concern. My big concern came when I saw that his trading coaching website was linked to his money management site. Suddenly the picture changed. Now, the trading performance he wrote about in Trading Beyond the Matrix could appear as my endorsement for his money management skills. Gratefully, he expressed that he had no intentions to present the appearance of my endorsement and he has taken some steps to correct that.

Let me publicly state that I have no way to verify whether the performance information any of my clients wrote about in the book was accurate or not. Originally, this particular client was simply talking about how well he had done with his relatives’ retirement account and I wasn’t that concerned over how accurate that information was; I had no reason to be concerned at the time. Since he has not graduated from the Super Trader program, I have not seen his trading business plan nor have I verified or approved any of the multiple trading systems his money management business now offers. I certainly have not in any way verified his claims about his track record. His track record statements may indeed be accurate, I just have no way to verify them one way or another.

Please be careful. In our Super Trader program, we have hedge fund managers, portfolio managers, financial planners, and many other competent individuals. If, however, you ever read an implied or explicit investment return claim related to the Super Trader program or the Van Tharp Institute, please be aware that I did not verify and have no way to verify anyone’s track record.

Furthermore, I do NOT recommend any traders as mentors or money managers. We are a trading education company and our business is to help people become better traders/investors. We do not provide any sort of advisory service for those who do not want to do the work for themselves. So please be careful about any claims made.

Please do not take any chapter of the Matrix book as an endorsement of any kind for an investment track record.

The client mentioned here remains a good friend and I respect him. This is not meant to disparage him in any way. I just want to be clear that I am not in the business of recommending other traders or coaches. Since my big lesson learned years ago from the unscrupulous client, you will notice that, other than an occasional book, I don’t endorse any products or services outside of my own: no software, brokerage service or trading platform. I may make mention of something I use, but I do not make endorsements.

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