How To Measure Trading Performance

Why Brokers Can’t Help You Trade

If you have a one on one relationship with a stock or commodity broker, then you have likely had the unpleasant experience of losing money. Your broker might be the type that makes a great neighbor, worthy of inviting over for a Sunday barbecue. You might even consider him a friend. But pay-as-you-go friendships are strange things indeed and would he remain friendly if you stopped putting food on his table? In friendships, loyalty is a good thing. But when the heart of the matter is a business decision or financial transaction, excessive loyalty can lead to clouded judgment and costly mistakes. It is almost uncanny how steadily brokers drain cash from the pockets of would be traders who do not understand basic truths about the industry. Hopefully the next few paragraphs will open your eyes.

To make a cynical analogy, brokers everywhere engage in a well rehearsed game of bait and switch. Promise new clients the world, then switch to damage control when losses start eating away at the account. Once the bloom is off the rose, keep the game going, and the commission dollars flowing, for as long as possible before the client quits in disgust or goes off on his own.

There are many different styles of broker, all of them eager to drain your account. Four of the most common are the pusher, the yes man, the true believer, and the rationalizer. The “pusher” is by far the most aggressive. He wants you to take X trade right NOW, and will not take no for an answer. The pusher is not above belittling or even mildly insulting you if you do not do exactly what he wants you to do, when he wants you to do it. The pusher typically gravitates towards naive or weak-willed individuals who are susceptible to a dominant personality.

In contrast, the “yes man” has precious few of his own ideas- instead, he prefers to rubber stamp everything, always saying what he thinks you want to hear. His basic strategy is to wait until he can detect some hint of opinion, and then agree strongly in the hopes of getting you to place a trade. He is the ultimate sympathizer, always commiserating, forever testing the wind. The yes man is usually a passive aggressive type who seeks out confident, opinionated clientèle who like having their egos stroked. The “true believer” is often an old timer and always a fundamentalist at heart, beating a tired drum for the same tired market that had a big move years ago. For the true believer, hope springs eternal- and so does disappointment. The true believer tends to lean on his one sided analysis like a crutch, seeking any tidbit or rumor he can find for reinforcement, and it is his mission in life to find and recruit other true believers.

The “rationalizer” is an amazingly consistent loser who always has an excuse for why his recommendations go bad. The rationalizer can cheerfully explain away everything except for his pathetic track record, which is never discussed- and like the true believer, “next time” is his eternal refrain. These styles are not concrete- in some brokers one will dominate, while others may display a combination. Of the four, the true believer and the rationalizer are probably the most dangerous, because if persuasive they can do the most damage, keeping you hanging on to hope for months or even years while leeching the lifeblood from your account- eating away at your capital, your confidence and your desire to trade.

The problem with the brokerage industry is not the caliber of individuals that it attracts. Honest, intelligent, hardworking people are drawn to the markets every day, and brokerage firms are a natural gateway into the financial world. Many successful CTA’s and fund managers got their start as stock or commodity brokers. But that is exactly the catch: those who evolve into successful traders inevitably move on to bigger and better things over time. Thus it is no coincidence that the vast majority of “experienced” brokers cannot trade. If they could trade, they would not have stayed brokers. Of those who do not move on as traders, another large portion leave the industry because they are fed up with the internal conflict and sense of moral compromise- the frustration of seeing clients lose money day in and day out without fail. What does this leave behind?

The brokerage industry also has a gross conflict of interest built in to the payment structure. CTA’s and fund managers have interests in direct alignment with their clients, because they are paid as a percentage of trading profits. They only make money if the client makes money. With brokers, there is no such alignment. Brokers take their commission cut whether the advice is good, bad, or worse than useless. It is thus no surprise that when it comes to measuring broker performance within the industry, the entire emphasis is on commission revenues generated, as in: “he generated a million two in gross commish last year- he must be a great broker.” Profitability of clients is not even an afterthought! The broker collects whether you win or lose (and in fact expects you to lose, be it sooner or later, partly due to his high costs). Therefore, it is his job to get you to trade as much as possible, regardless of your best interests, so he can get his cut before you burn out. With this in mind, what percentage of recommendations would you guess are actually based on solid analysis and firm conviction, rather than the simple desire to bait a hook that draws in commission dollars? Zero would be a cynical answer, but sadly close to the truth.

But say that you have found the rare broker who is competent, knowledgeable, has a passion for the markets, knows how to trade, and actually has your best interests at heart? He is probably new to the business, five years or less, and will not be staying much longer. Even now, there is one final obstacle to be overcome: You. In order to make consistent use of your broker’s skill to place your trades, you must have the emotional temperament and discipline to ride out inevitable losing trades of your system. You must have strong commitment and consistency to take each valid trade of your system without fail and remain diligent. In other words, to make good use of a broker, you have to be knowledgeable and skilled enough to not need him in the first place.

The final lesson is that if you are going to trade, you can never substitute someone else’s experience for your own, or expect someone else to make up for your shortcomings. You must play your own hand, and ultimately dictate your own success or failure. This in itself ultimately makes the broker irrelevant.

About the Author

If you enjoyed this article, please go to www.NicciAndLee.com for more wealth creation strategies and techniques. Learn from those who have been there and done it at www.NicciAndLee.com

Amco Basic Ingredients Stainless Steel Measuring Cups, Set of 4 $9.89 Description: The Basic Ingredients Measuring Cups deliver shiny polished 18/0 stainless steel quality and ultimate performance. Each measuring cup has easy hang handles. Truly designed for the professional, you will love it in your kitchen! These come from the same manufacturer who sell to William Sonoma……made to last a lifetimes. Color: stainless steel Items included & Size & Measurements: Se…

Bushnell Trophy TRS-25 1xRed Dot Sight Riflescope $85.40 There’s nothing like a red dot for fast target acquisition and accuracy in dim conditions, and no one makes red dots like Bushnell. The TRS-25 1×25 red dot riflescope boasts Bushnell’s Zoom Dot feature, which gives you the ability to fine tune the size of your aiming point down to one MOA for precision shooting and all the way up to 10 MOA for close quarters. The scope is also engineered with Ambe…

Nikon ProStaff 3-9 x 40 Black Matte Riflescope (BDC) $166.99 Boasting Nikon’s fully multicoated optical system and innovative adjustment technologies, the tried-and-trusted ProStaff 3-9×40 riflescope offers a superior hunting performance at a price that fits into the budget of virtually any hunter. The scope’s optical system transmits up to 98 percent of available light, ensuring maximum brightness from dawn to dusk. To simplify field adjustments, Nikon als…

Bushnell Banner Dusk & Dawn 4-12×40 Riflescope $91.95 Ask any trophy hunter or taxidermist, and he or she will tell you more tags are filled in the low-light hours than any other time. Enter the Bushnell Banner 4-12×40 riflescope, which is designed to excel in early morning and late evening light. With its Dusk & Dawn Brightness (DDB) multicoated lenses–which add clarity and brightness when the sun is low or under heavy cloud cover–the Banner scope…

How to Measure Managerial Performance $49.02 Author: Sloma, Richard S. Binding Type: Paperback Number of Pages: 272 Publication Date: 1999/01/01 Language: English Dimensions: 9.05 x 6.05 x 0.80 inches

How to Measure Managerial Performance by Sloma, Richard S Edition , 0 $13.49 ‘Here at last in one volume are the comprehensive and indepth checklists to effectively measure and evaluate functional performance and to determine where improvements are possible. This practical approach to better management will be invaluable to senior and middle managers who are striving for top performance and outstanding results.’

How to Measure Managerial Performance by Sloma, Richard S. Edition ILL, 0 $13.99 ‘Here at last in one volume are the comprehensive and indepth checklists to effectively measure and evaluate functional performance and to determine where improvements are possible. This practical approach to better management will be invaluable to senior and middle managers who are striving for top performance and outstanding results.’

High Performance Trading by Ward, Steve Edition ILL, 0 $28.49 High Performance Trading provides proven practical techniques and strategies to help traders of all abilities, experience levels and styles to enhance their trading performance and psychology.Based on practical coaching and training interventions, personal experiences, the latest research and feedback, and advice from leading traders, trading coaches and trading psychologists, this book offers something for everyone who wants to become a better trader.- Discover how to avoid the common pitfalls of trading and how to take the practical steps that can set you up for trading success- Strengthen your trading discipline as you discover the art of flawless execution- Develop and hone your mental edge through learning to think like a successful trader- Programme yourself for trading success with powerful mental conditioning techniques- Develop unshakeable focus and concentration and learn how to get into the trading zone- Understand how to achieve and sustain a core of trading confidence- Learn how to utilize simple techniques to manage your emotional states- Build resilience to cope with trading stresses and pressures and manage losses, setbacks and errors- Move towards greater consistency and success in your trading performance

Measure for Measure by Shakespeare, William Edition , 0 $13.99 Since the rediscovery of Elizabethan stage conditions early this century, admiration for Measure for Measure has steadily risen. It is now a favorite with the critics and has attracted widely different styles of performance. At one extreme the play is seen as a religious allegory, at the other it has been interpreted as a comedy protesting against power and privilege. Brian Gibbons focuses on the unique tragi-comic experience of watching the play, the intensity and excitement offered by its dramatic rhythm, the reversals and surprises that shock the audience even to the end. The introduction describes the play’s critical reception and stage history and how these have varied according to prevailing social, moral and religious issues, which were highly sensitive when

Measure For Measure $12.32 Written in 1604 when James I–a king particularly concerned with the religious aspects of his leadership–was fresh on the throne, MEASURE FOR MEASURE is a reflection of its time. In it, a sovereign's role in the legislation of morality is explored, as two extreme poles of government are navigated–the Duke's over-leniency as the play opens, and his deputy's rigid judgement that precipitates the tragicomedy. When the Duke realizes that his rule is too lax, he appoints his deputy Angelo to reinforce authority. However, forgiveness, a Christian virtue and therefore an implied virtue of the play's Christian government, is not a characteristic of Angelo, who, reviving an old morality law, condemns Claudio to death for impregnating Juliet. The dilemma of the drama is presented when Claudio's sister Isabella leaves the cloister of the convent to plead for Claudio's freedom. Scandalously, Angelo agrees to free Claudio if Isabella will sleep with him. An estranged wife, a bed trick, and a subplot concerning a pimp present further complications, but ultimately lighten the atmosphere to lead a tragic drama toward a comic resolution. Shakespeare drew on many sources that were themselves inspired by a real 16th-century event in which an Italian man who was condemned to death was promised freedom after his wife accepted a sexual proposition from the judge in exchange. The first records of performance point to December 26, 1604. The next documentation recalls a performance one hundred years later. Though records certainly get destroyed, such scant evidence indeed suggests poor public reception of the play. MEASURE FOR MEASURE was the last of Shakespeare's comedies, and intense tragic material surfaces in it that is fully developed in the plays to come, including OTHELLO, KING LEAR, and MACBETH.

How to Understand Business Finance: Understand the Business Cycle; Manage Your Assets; Measure Business Performance $10.16 Used – Explaining how to run a business in a real market, this work describes a business as it proceeds from initial set-up through its first year of trading, providing a quick course on business finance as it relates to business growth.