Why does Using Other Trader’s Forex Strategy could get you Broke?

Did you ever ask yourself why investment banks, such as Goldman Sachs, Merrill Lynch, or hedge funds as Blackrock and Pimco have an army of analysts and strategists? Why Blackrock is not using Goldman Sachs’ strategy? If it works for Goldman, it should also work for Blackrock…right? Those companies know what others are doing but they also know they will lose big time if they follow someone else. So why should a trader follow someone else’s strategy then? One thing is to ask for some advice and another thing is to blindly follow a trading strategy. I met many people desperately looking for the winning strategy, mostly newbies or less experienced traders. One of those places where these traders try to find the Holy Grail is the Forex4Noobs where Nick (who I believe is the owner of the website and an experienced trader) provides his trading strategy and tries to “help” the traders to be profitable. Following someone else’s strategy might get you broke. Is this what you want?

 

How you can go Broke from Using Other Traders Trading Strategies?

Let me give you an example of “wasted time” that I met on that website. Using the “dave11111” nickname [As seen on Forex4Noobs], someone wrote:

“Hi Nick, I’m trying to follow your strategy for trading the support and resistance levels on the 8h eur/usd pair. I have all your levels on my chart but not sure, what to look for that would signal a reversal or a continuation. Take the 1.3020 level where it is now. I’m really guessing as to whether it will continue to go down or turn and head back up from here. Can you help me spot the correct indecision signals please?”Of course, “dave11111” does not know what to look for on someone else’s chart, but he does not seem to realise that this is the whole problem. Nick knows what to look for because he built those levels, and he has a strategy to trade those levels, while “dave11111” is only “guessing” how those levels should be traded. This is the best example to see how it is possible to have two different outcomes by following the same strategy: Nick probably cashing the profits and “dave11111” collecting losses. Believe it or not, the same outcome would result if Blackrock would follow Goldman’s strategy. Instead of doing that, Blackrock hires their own analyst and strategists to build and follow their own investment strategy. This is what you should do too. Stop looking for someone else’s strategy. It will not work for you even if it is the best strategy you have ever seen.

 

There was another person on that blog – John - who seemed to have a problem with the trend and the time frames: “Hi Nick, similar problem to some, on the 8HR TF which indecision candle is the right one. Eg. Right now on the GBPUSD there is a great pinbar almost completing, like a reversal signal, but the trend is clearly down. How do you determine whether to take it or get caught in a bull trap? Do you jump to lower TF or is it a gut feel? Thanks….John”

I have to say that this time I was impressed with Nick’s answer: “It is all about the entry. I want to see a transition of power from the sellers to the buyers. I want buyers to prove that they have taken control of the market. In the trade you mentioned I had my entry at 1.5280. Buyers would need to do two things to break that level: 1. Break the highs of the previous two candles, this creating a higher high. 2. Make a twenty-pip move from the open price and break a minor psych level (1.5280). These two things would indicate that buyers have taken control of the market. It is not always about the indecision. Indecision means that price is undecided; it could still go either way. You need to wait for a clear winner before you enter. You need to work on your entries!”Did anyone notice that Nick teaches John to “wait for a clear winner before enter” while he already entered that trade? He says all that stuff about “buyers need to prove they have taken control” and that he needs to see “a transition of power from the sellers to the buyers” and only a few words later he continues: “I had my entry at 1.5280”. What happened with all those conditions needing to be fulfil? I underlined some key words from John’s comment because I noticed so many traders having a hard time to establish the trend. If John was so sure that the trend on 8HR TF was “clearly down” he should trade that trend and not to “jump on lower TF” to get help. Do you people know that we can have a bearish tertiary trend into a bullish secondary trend into a bearish main trend? Now I sure did a big mess eh? But it is true: we can have a bearish trend on the daily chart, a bullish one on 4h&8h chart and again a bearish trend on 1h chart. So if you see a bullish trend on 8h chart John, trade it there, on 8h, looking for support and resistance to exit your trade. If you go on lower time frames you will see another film and get confused.

 

 

 Conclusion – The Only Strategies that Works is your Own

The time spent trying to trade someone else’s strategy is called “wasted time”, while the time spent building, your own strategy, is called “investment”…in yourself. Groucho Marx (American comedian) once said: “Man does not control his own fate. The woman in his life do that for him.” Do not let another trader to control your fate in the Forex market. And as for John, (and there are many traders in his position), instead of asking Nick about the trend, you better read the Dow Theory: no one will ever teach you better than the “Dow Theory” how to establish the trend. In my opinion, to start trading not knowing the Dow Theory is like throwing you in the sea without knowing how to swim.