45 thoughts on “I Usually Disagree with the Man with the Phil Spector Hair, But Altucher Is Right Here in Many Ways

  1. I don’t think twenty-somethings should avoid trading with a sound strategy, but buying a house, buying and holding, etc. are poison. Also, Spector, …er Altucher 🙂 is dead on with the investing in self wisdom. True! Do both: self invest and sound trading.

  2. hehe almost bought a trading course but then… lol. Question mike: I’ve read some skeptic opinions about trend following and a thing that does make sense to me is that you need quite a lot of start capital. With proper risk management there is only a small share for a bet. With many bets and some losers you need to make quite some homeruns to make money ( transaction costs)..

    More concrete: is 20k enough for the trading systems you teach?

  3. I saw the Altrucher video and basically agree with it. “Investing in myself” includes developing a trading system and trading a limited amount of my risk capital with it.

  4. William, I suggest you to read the Turtle Trader book first. If you still have that kind of questions, look for other trading system or just don’t trade at all, because no amount will be enough for you.

  5. I was also wondering how much do we need to trade your trading systems Micheal. I mean it is like a business and you can’t start up any business if you dont have the right amount of capital right?

  6. William,

    A big part of where to invest depends on how much time you commit to trading and how much money you are trading. Trend following may be the best way to invest with larger dollar amounts without a huge time commitment. One thing Michael never addresses positively is the viability of other strategies. Trend following is almost certainly not the best way to trade if you are making a living from the markets (excluding managing a fund). The returns that you would achieve with even the best trend following strategy are going to be significantly lower (assuming managing less than 500k) than a competent short tern trader and returns can go flat for multiple years. All of that said I think buying the trading course probably would be a good use of resources with 20k if you have a real job. It should provide you education that will set you on the right track for the rest of your life.

  7. With these trading systems there is too much diversification for a small account. That means your not going to blow it out of the park if your using some sort of risk controls because they are not going to let you bet that much on any single trade. What Altcher wants you to do is to leverage that 20k on one single idea that you have an edge in for the long-run. I totally agree!

  8. Mark says: “Trend following is almost certainly not the best way to trade if you are making a living from the markets (excluding managing a fund).”

    I don’t think it’s wise to try and “make a living” from the market with less than 500k no matter what style you follow. “Making a living” is a very personal question. Is it possible to trade a very small capital base? My experience is undoubtedly yes it’s possible. “Making a living” on the other hand is a whole different question.

  9. It’s like any small business, if you have limited capital and if you try to live off your business the first year or two you may be courting trouble.

  10. thanks for all the usefull answers! I do think it’s a legitimate question after all.. @arseny saying no amount is big enough for me is nonsense! The question arised on me after reading the turlte trader ;-)) I guess backtesting gives the answer..

  11. Backtesting gives the answer but Michael already has it. I am really intrested in purchasing these systems and i do have capital to get them going but how much is enough? i am thinking about it like poker. You cant compete with a small stack no matter how good you are. the guy with more chips is always going to have an edge.

  12. Derek, eyes wide open!

    See: http://www.turtletrader.com/capital.html

    These days with minis, ETFs, LEAPS® — there is no good reason for someone to not trend follow.

    How much do you need to start? Hmmm … How much do you need to stop?

    Shout to Seykota for that pearl of wisdom…

  13. …”the guy with more chips is always going to have an edge.”

    Wrong!

    See:

    “I know of a few multimillionaires who started trading with inherited wealth. In each case, they lost it all because they didn’t feel the pain when they were losing. In those formative first few years of trading, they felt they could afford to lose. You’re much better off going into the market on a shoestring, feeling that you can’t afford to lose. I’d rather bet on somebody starting out with a few thousand dollars than on somebody who came in with millions.” – William Eckhardt

  14. There are some brokerage firms offering Forex for as little as $100.00, some will open accounts for $250.00.
    A great way to start actual trading and earn some money. I will be starting with about $10,000. But you still have to LEARN. I know people making $5-10k per month. They are motivated and willing to learn. No body can guarantee your success or your profits. I have done a lot of research into trading, and I feel comfortable doing it. BUT!. I want to do better, and make a comfortable living. I feel confident I will do it. There is a learning curve with some bumps. You are going to take loses, and anybody who says otherwise is a liar. Read the books and educate yourself. Of course if you can’t make a living at trading, why are you doing it?

  15. These days one can construct a small budget portfolio and dial-in the position size fairly easily. The trade-off for a small account is more time passing before you reach your desired goal. So, patience is key. But ironically patience is something the novice trader usually doesn’t have.

  16. The reality is that anyone who doesn’t understand how the market works should avoid the Stock Market (twenty-something or otherwise). BTW – this is the majority of small time investors.

    Having said that, I can’t imagine any “guru” that has a worse track record than Altucher. I frankly can’t understand why anyone would pay attention to this ignoramus. Yet there he is pontificating. I guess it just goes to prove the original point…..if you don’t know what the hell you’re doing stay out of the market (and avoid Altucher)!

  17. Its amazing how few critical thinkers there are. Forex? Really? Think how absurd thats sales pitch is. “You can make 5-10k a month.” Its not like the currency markets are illiquid. What does 5-10k have to do with anything? If its so fucking easy, those same people that are making 5-10k should be growing their income geometrically. I have never met a successful Forex trader or seen one with an audited track record. They may exist but I doubt it.

    The poker analogy I read was awful. I guess you are comparing trading to a poker tournament where stack size matters. Stack size is basically irrelevant in a cash game which is the correct analogy to trading. (A short stack actually has an advantage or larger stacks, because larger stacks will open more loosely and the SS can shove over, but the SS will have a lower win rate than a good full stack because the full stack is winning more against the droolers.)

    Trading a small portfolio is infintely easier than a very large one. I don’t understand how this is not universally understood. Small and microcap stocks trade the most inefficiently because large dollar amounts can’t move in and out of these stocks easily which eliminates a lot of smart money and adds a disproportionate amount of dumb money. A semi competent short term trader will greatly outperform in these instruments. Unless you have Down’s Syndrome, I am confident that someone with basic knowledge will earn more than 99% of the population with 500k. You might not make Soros money because trading small and micro caps isn’t scalable. Ask guys like Johnwelshphd, John Lee, or even Tim Sykes (who all have real track records) what returns are consistently achievable with small dollar amounts.

  18. Are you kidding me? You dont think the amount of money you have to even attempt to start trading makes a diffrence? The people William Eckhard is talking about have something special in their personalities. They are .001% of the population. They can afford to take shorter-term leveraged bets and manage to stay on top because there is something special built into the way they think. 95% of traders lose money. And some of them lose money not because they dont have a plan or a startegy, they lose because they are underfunded.
    Mark Says: The poker analogy I read was awful.
    Poker is a zero-sum game exactley like trading. If you profit, you are taking someones money. If you lose, somebody else is taking your money. Its all about how you bet. If you dont have enough capital to stick with your betting system and you run into a string of losses, the guy with the more chips is going to win.

  19. “…have something special in their personalities…”

    Something ‘special’ eh? Guess, you missed the Turtle experiment… Not done your homework and don’t have your facts right… Derek, best advice? Don’t trade. The psychology, the most important part, already has you beat.

  20. Also, I would encourage readers who see this misguided comment…to read both of my books cover to cover. Debate me all you want, but if you do at least acknowledge my words in print and make an effort to refute them within your argument. Bottom line, all that I put forth on these subjects is not on this blog …so I will hammer back if painted that way by readers ignoring my full views.

  21. People fail not because they don’t try hard enough but they are always looking at excuses and shortcuts to success and glory.

    Simple Trend following systems does not require huge capital unless you are wanting to be a overnight star. TF is a strategy that can be as simple as a 15 * 50 Moving Average Crossover. You need not buy expensive trading related products to achieve 50% of what a simple strategy such as above will give. But one should have the discipline to stick with a strategy that one has tested and take all trades that the said strategy gives.

    As regards to “Trading for a Living”, its romantic to hear and think of doing it, but unless you are adequately capitalized, chances are that you will burn. This is because people try to make impossible monthly returns with a small capital.

    If you have a capital of 20K, you would be outperforming everyone if you can consistently generate even 4.4 – 4.5K in yearly profits. Calculated on a per month that comes to around 0.375K per month. But can you lead a normal life with that sort of income will be the question one should ask.

    Do note that Large Capital does not have relation to Large Profits. Bigger the Hedge fund,smaller the gains since there are always limitations. LTCM with its 4 Billion kitty could not even survive.

  22. The turtles were a CAREFULLY selected group of indviduals who were acting on Richard Dennis’ niche.

    Michael Covel Says: Derek, best advice? Don’t trade. The psychology, the most important part, already has you beat

    I will take your advice and put my money into something i love to do and have an edge in and i will leverage it to the most. I will probably make a much better return

  23. Mr Michael Covel is right:[Michael Covel Says: Derek, best advice? Don’t trade. The psychology, the most important part, already has you beat]
    Why debate with someone who stubornly refuse to open his mind, to learn, to understand and work hard to achieve success.
    Let him go with the 99% of the population.

  24. “The turtles were a CAREFULLY selected group of indviduals who were acting on Richard Dennis’ niche.”

    Wrong Derek, but I want you to believe it because you clearly need an excuse. Acting on RD’ niche? Sounds ‘smart’, but that statement means absolutely nothing. Carefully selected? Don’t you actually want to know what happened? Or do you just like the mythology? You did not read my book(s) — which was clear from your first comments.

  25. You can trade successfully with ANY amount of money, the key is to size your positions accordingly (for both single trades and total portfolio) according to your trading system’s expectancy. You could have the largest account in the world and it doesn’t matter if you don’t have:

    1. A tested system (preferably trend following) that shows at least a small positive expectancy

    2. Proper understanding of trading psychology to use that positive expectancy system properly (develop that “something special” in your personality (discipline) to resist basic human urges regarding trading)

    3. Money management plan to minimize losses and maximize gains (“all-in” with your selected position size on every trade won’t cut it in trend following)

    All analogies involving poker or anything else are invalid without including the three subjects above. However, once you do have the above the size of your account (or how many poker chips you have) becomes an incredible advantage.

    P.S. to Mark- I am a successful Forex trader and have been for years. Just because there are charlatans who will hook people with sleazy sales pitches (exists in all markets, not just Forex) doesn’t mean it’s some kind of fraud.

  26. Michael Covel Says: Wrong Derek, but I want you to believe it because you clearly need an excuse. Acting on RD’ niche? Sounds ’smart’, but that statement means absolutely nothing.

    Why am i wrong? Were the turtles truely average joes? How do i sound ‘smart’ but mean absolutely nothing?

  27. Very interesting comments. Of course if there is no chance of making money at trading why would anyone trade? Somebody is making money at it, and no it is not easy.
    The Turtles proved that anyone can learn to trade if they follow a set plan. By the amount of money they made something obviously worked. Yes only a small percent make money trading. But they are making money.I am also willing to bet that they are all following a system of some kind and discipline themselves to stick to it. Trending perhaps?

  28. Trader Jim,

    I was not very clear in my statement. I was referring to the people who buy into the idea of using 20:1 leverage and trading a 10k account commission free/slippage heavy in order to produce an income. I don’t see why trading currency would be much different from trading any futures contract. I am at a stage in my development where I tend not trade anything that has mostly smart people trading it, so have not traded a forex contract.

  29. Mark-

    One of the nice things about the trend following method is that it teaches you that markets are markets. As long as you don’t trade markets that are extremely illiquid (and therefore prone not to trend but only whipsaw with volatility) in theory you can trade ANY market.

    The only “smart” parts are having a sound money management strategy in place so that you are keeping your position size (in money risked) similar across those markets (or even vehicles within those markets), and understanding how to handle portfolio risk as well as managing your money on a single trade. From your comments about leverage and slippage you seem to understand at least some of this already.

    Once these things are understood, for the most part “a market is a market”.

  30. A final question to Mike Covel.
    Is anybody out there making money, besides fund managers?

  31. Hempman, everyone is a loser in the markets. No one wins. Everyone is destined to be scared hiding under their bed. Then they die. Life really sucks, huh?

  32. In fact, as I type this I am under my bed, in a deep sweat, waiting for the end times. The Mayans after all say it all ends in 2012. Then when we are all gone…no one will have to worry about risk taking ever again! [Heavy Sarcasm]

  33. lol! Me too Michael, but I splurged for a concrete bunker and lots of DVD’s!!

    Seriously Hempman, I understand your skepticism. But trust me, there are a lot of us who are doing quite well. Ideally, see if you can find a successful trader to hang out with for a while so that you can appreciate the extent to which a successful trader goes against the intuition of the average joe and the insights of the media…this is the psychological barrier that most people have such a hard time getting over when they trade.

    So many THINK they are over it, but in a single moment of weakness they plunk down 50% of their bankroll on the “sure thing” and watch as it wastes away.

    For example, Goldman’s calling a market bottom right now. Do you believe them? They’re a big company, well respected, top-rated analysts, and they all drive Ferrari’s. What happens if you believe them, put in a huge trade and it goes against you? Do you rationalize and say, “They must be right…I’ll stick it out” and lose your trading money?

    These are the hard decisions and discipline required to be successful. By the way, given Goldman’s past record in calling bear market bottoms, don’t bet the farm…they suck.

    Cheers

  34. Good words DG Dye.
    Yes I have a healthy skepticism. Have read a lot over the last year on trading, it all seemed more confusing then anything. Then I found and read both books on Trending/ Turtle Traders. It forced me to rethink my way of thinking about trading. First it did simplify things. I have been trying to find a good trader to hang out with. I feel more confident about trading since reading the Trend Followers.
    One thing I have done is to eliminate all the news about the market, since most of it is BS anyway. Trending seems to be the only system that works. I will be sending for the Trending program, and hopefully I will be seeing some successes this summer.

  35. Wow,,this is some very good interaction,,Ive read about 12 books in the past year, am currently doing a bit of trading. And after all that reading,it has inspired me to become a part of the 10 or 20 percent of traders who beat the market. I loved reading” the complete turtle trader ” and am still in awe at the outcomes of Richard Dennis’s thought process,, so just my 2 cents,, I think their is a great opportunity out there for anyone willing to do the hard work of making a trading plan and applying it. There have been some comments about position sizing, but I still think , exit strategies are huge in terms of a successful trading plan as well.

  36. TRADING DISCIPLINELY WITH A TRADING SYSTEM WILL DEFINITELY
    1) LOSE MONEY IN SIDEWAYS MARKET.
    2) MAKE MONEY IN EXTENDED BULL MARKET.
    3)MAKE MONEY IN EXTENDED BEAR MARKET.

    THE EDGE IS
    1) MINIMISE LOSSES IN SIDEWAYS MARKET.
    2] LEVERAGE POSITIONS IN BULL AND BEAR MARKET.

    THE EMOTION FACTOR
    1) PRESSURE WHEN LOSING MONEY IN SIDEWAYS MARKET.
    2) FEAR TO LEVERAGE WHEN MAKING PROFIT IN BULL AND BEAR RUN.

    IN THE LONG RUN, ACCUMULATED LOSSES IN SIDEWAYS MARKETS WILL BE OFF SET BY ACCUMULATED PROFITS IN BULL AND BEAR MARKETS.

  37. An excerpt from my book “The Complete TurtleTrader” that gives the background perspective of the Turtles:

    “Richard Dennis wanted a mishmash of personalities, similar to MTV’s Real World and their diverse casting calls. He selected both far-right-wing conservatives and bleeding-heart liberals. A high school graduate and an MBA were picked from the thousand-plus applicants who threw their hats into the ring. The wild cross-section of his final Turtle picks demonstrated Dennis’s diversity desires. There were college graduates from the State University of New York at Buffalo (business), Miami University in Ohio (economics), the New England Conservatory of Music (piano, music theory), Ferrum College in Virginia (accounting), Central Connecticut State University (marketing), Brown University (geology), the University of Chicago (Ph.D. in linguistics), Macalester College (history), and the United States Air Force Academy. Others Dennis students had recently held jobs at Cushman/Wake-field (security guard), Caterpillar Tractor (salesperson), Collins Commodities (broker), the Ground Round Restaurant (assistant manager), A.G. Becker (phone clerk), Palomino Club (bartender), and Dungeons and Dragons (board game designer). One student simply declared his status as “unemployed.” Earlier job histories of those who made the final cut were even more mundane: kitchen worker, teacher, prison counselor, messenger, accounting assistant, and waiter.”

  38. Hi Doug,

    “The 10 or 20 percent of traders who beat the market” seems high to me…my commodities broker (40 years experience) swears that only 3% beat the market long-term…2% do OK, 0.5% do very well, and less than 0.5% blow the doors off with phenomenal returns.

    Interesting enough, everyone has access to the same data…so why the big difference? (Hint: Read Michael’s books).

    Cheers

  39. And then my next step will be to figure out a way to find a wedding that Salem Abraham will be at so I can talk to him, :), or Richard Parker, or Micheal Covel,,,Micheal do you have any weddings coming up in Canada?

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