At first glance, online trading rooms appear to be an ideal way for new traders to get an inside view of how professionals actually go about the business of trading financial markets. Where else can ’newbies’ obtain real-time market experience, free from the inherent dangers of going it alone? Well, unfortunately, like most things related to trading, things aren’t as simple as they first appear. In practically every other vocation, from street-sweeper to rocket scientist, obtaining first-hand, on-the-job training is valuable – essential even – to the learning process, and if new traders were able to experience such real-life training, then all would be fine. But online trading rooms do not provide a true picture of a professional trader’s methodology. Let me explain the reasons for this anomaly…
The Forex markets are open 24/7 (yes, transactions are made over the weekend too, even if your broker doesn’t want to connect). Entry signals can occur at anytime during the day or night, but trading rooms usually open only during peak-viewing periods, i.e. when the greatest number of people are likely to be in attendance. These peak-viewing periods do not necessarily coincide with the best time to trade. Online trading rooms, first and foremost, are sales and marketing tools, designed to showcase a firm’s trading products and services to a large pool of prospective new buyers. If you take into consideration the cost of operating these rooms (wages, broadcasting fees, licensing obligations, etc.) it’s not difficult to see, that in order to ensure their viability, there exists a need to fulfil the audiences’ pre-formed notions of just how a trading room operates. As a result, room moderators find themselves under considerable pressure to entertain attendees by entering trades on a regular basis. But here’s the rub… The vast majority of the time, professional traders are actually sitting on their hands, waiting patiently for the most pristine of signals to occur. This non-activity is at odds with the marketing model, which seeks to portray trading as an elite, exciting and fast-paced pursuit, linking it to the public’s perception of a casino’s high-roller room. This conflict, between reality and expectation, results in market positions being entered, which may otherwise not even have been considered if the moderator was trading alone.
The best that can be said for a retail trading room is that it provides a sense of community – a meeting place for like-minded people to congregate and communicate. However in practice the objective of intensive learning is rarely achieved, simply because the actual number and type of trade entries is unrealistic and unsustainable. All traders need to match their trading style to their personality and with limited hours in which to operate, and such a diverse audience to teach, moderators find themselves between a rock and a hard place trying to provide high quality tuition via the trading room vehicle.
As an example, assume I’m swing trading hourly charts intra-day. I’ll rarely have more than one position open at any particular time and this position may have been placed early in the morning, or late in the evening, whenever the best signal presented itself. A trading room however, running five days a week for a few hours in the evening, can’t possibly offer students a live, ‘over-the-shoulder’ perspective of how a trader plans and executes these real-time entries or how the trade is managed, particularly in the case of discretionary strategies which require on-the-spot decision-making. For the most part, only simulated trades are able to be demonstrated in a trading room and this causes a fall-off in audience attention and attendance. A trading room is supposed to provide a window into a real, live trading environment, but in order for it to be commercially viable, it needs consistent room attendance. Unfortunately, in keeping with human nature, most attendees lose interest after a relatively short period of time. In an attempt to provide substance to the room and stem the attrition rate, moderators are forced to enter more borderline positions. As a consequence, the failure rate rises and attendees become disillusioned. They drop out anyway. It’s a typical Catch 22.
So, what’s the answer? I’ve been training people for more than seven years, and I’ve come to the conclusion that trading rooms are a waste of time and resources. If people really want to learn, they’ll find a way. They’ll commit to and focus on the task ahead. They’ll pinpoint their failings and seek professional help to get them on track. Yes, it costs money to learn, but what doesn’t? Honing in on the crux of the problem is far more likely to provide quick and cost efficient solutions than floundering away in a non-productive trading room. Remember, trading is a serious business, not entertainment. In reality, the act of trading can be quite boring, so if you’re seeking thrills, head off to a casino. You’ll have much more fun losing your money there.