As always, my opinion in financial matters is my own and does not necessarily reflect the views of my employers
Do you believe that property prices are going to rise forever, if so, come this way I have a bridge I’d like to sell you. Perhaps you believe that your path to riches and fortunes is by day-trading the markets based on the seminar that you went to by a brokerage company? If the answer to either of these questions is yes, then I hate to tell you, you may be a member of the Middle Class Moron’s club. As it was described to me, the MCM is somebody that relies on the infrastructure and follows the rules that society provides them in order to be successful. You though, you don’t want to be a Middle Class Moron, do you?
Where did all this come from? Remember the other week I talked about the TV show Million Dollar Traders – Link? The friend I told about this decided that long/short trading was interesting. From there he found Anton Kriel’s Institute of Trading. Like any business they’re selling something, but as an introduction they offer free Seminars where Anton talks. Anyway, as I was talking about the man only days before, I set my expectations low and my cynicism into overdrive. Then I went along to see what Anton is like in real life. Before the talk started properly, he was talking about random subjects with some of the other early arrivals. I was trying to work out whether what he said could be trusted – turns out it can. Despite my initial reservations, he’s actually a great speaker, and very knowledgeable. So what makes Anton qualified to stand at the front of a room and tell everybody how they should be making money? First, he has a verifiable track record. The Financial Conduct Authority register of individuals holding controlled functions lists Anton as being at every company he says he has (Link). He was chosen by Lex van Dam to supervise his money on Million Dollar Traders and he ‘retired’ as a millionaire by the time he was 28.
Having decided that Anton was worth listening to, let’s look at what he said. It can be condensed down to these three points: The financial system is heavily biased against small traders; unless you have large amounts of capital to invest, you will need to use brokers who promise big and deliver little; and that people who claim to be independent professional traders may in fact be neither. Anton suggested that only around 5% of brokerage accounts ever make money. What then is he selling, and why is his version of the truth better than the broker seminars he takes the piss out of? It seems to be this: If the system is biased against you and full of misinformation, then learn from someone who managed to make money from the system. Of course, Anton could end up making no more money than the people he criticises, but from what I’ve seen, this isn’t the case.
I want to expand on the three key messages I took away from the seminar:
The system is biased against small traders
The financial markets are a zero-sum game. For every winning trade, there has to be an equal losing one. The brokers that you trade through on the other hand have no interest in whether you make money. They know that 90% of the time, retail investors will get it wrong, and will actively bet against them. The people trying to get you to join a specific brokerage, or use a specific trading platform will tell you that it’s easy to make money using their techniques. The fact is, if it were that easy wouldn’t everybody be doing it? Anybody that tells you that you can make money day trading on technical analysis is probably trying to take your money. If you take Anton’s advice then you should trade a well-balanced long/short portfolio over 1-3 months. Also invest in what you properly understand. If you know tech, invest in tech. If on the other hand Intel says that their new chip is only getting a 5% yield and you don’t know whether that is a good then, what makes you qualified to invest in them.
You have to use brokers
Given that you have to use them, you have two options. Firstly, you can do the opposite of whatever they recommend; remembering that they expect you to lose money 90% of the time and your losses are their gains. Second, if you’ve done your research properly then why do you need to listen to the advice of a broker?
The ‘professional traders’ may not be what they appear
A professional investor is somebody that has worked in a controlled function at an investment bank or hedge fund. In order to do this you have to be registered with the FCA. On the other hand, to provide education, you don’t. Working for the FCA, it is nice to see somebody in the industry encouraging consumers to make use of what we do and check that their trading educator is authorised. You can do it here. If they’re not registered then they’re not a professional trader. That’s not to say that they can’t tell you anything useful, just that they’ve never worked in the industry. If they say they have then you have to decide if you’re happy trusting someone that may be lying about their background. Additionally, thanks to Introducing Broker (IB) agreements, the person selling you a trading education may actually be receiving commission from the broker, both for the introduction and a percentage of your investment. It would therefore be in their interest for you to invest on the platform they are suggesting you use, and investing a large sum of money.
For all that I have said on the subject, trading isn’t something for me. Even so, I’m glad I listened to Anton talk. I heard the industry described from a perspective that I haven’t seen before. This brings me to one last observation. In an email Anton sent prior to the event, he mentioned the need for security. I thought that he was being a little paranoid until after the event when I posted this
— Callam McMillan (@CallamMcMillan) July 31, 2014
on Twitter. I then received a series of rambling messages from somebody that seems to have a grudge against Anton. Then again, when you go around telling potential customers of an industry that is conspiring to dupe customers of their money, you’re going to attract some attention. I think then, the message is, don’t be a Middle Class Moron. If you can get to one of his seminars, it’s well worth investing three hours and you might learn something. Best of all it’s free, and there’s no pressure to buy anything.