I am happy to see the overwhelming positive response to your new book on Dennis and his turtles. I just think it’s a great read and it touches on the commitment one must make to be successful in the trading business. A recent post on Paul Tudor Jones, who I knew from my old days at Commodities Corporation, prompted me to send you the following comments:

Everyone remembers the story of the Pied Piper of Hamelin, Germany. In 1284 the town was suffering from a great rat infestation. One day a man claiming to be a rat-catcher approached the villagers with a solution.The town promised to pay him to remove the rats and thus he proceeded to do so. The man played a musical pipe that lured the rats into a nearby river in which all the rats drowned. The town refused to pay the rat-catcher and later he returned and lured all of the town’s children into a nearby cave never to be seen or heard from again. The story has many endings and I prefer the one where the town paid the piper in Gold for the return of the children.

What does the rat-catching pied piper have to do with trading? My belief is our industry is full of modern day “rat-catchers”. They come in many forms but mostly they write newsletters on trading and what markets are going to do and how “rats” aka novice traders can simply follow their advice and achieve great wealth literally overnight. These letters range in cost from $20 per month to $3000 per month. They are constantly dwelling on the most recent “good call” on XYZ market. So what’s a good call. Let’s see? A recent newsletter I was provided by a close friend states The US stock market is at or very near an important high. Okay-great! How do I get in and where? How much do I bet? How much do I risk on this bet aka where is my stop loss protection? Where do I get out if the bet works? This particular newsletter advocates avoiding the use of stops. That’s a sure way to get to the poorhouse in trading. I believe it is very simple why 95% of new traders lose money. Many of them follow the “pied pipers” aka gurus that are alive and well in our industry.

I attended a manged money conference a few years ago. There were probably 100 booths promoting the latest “get rich quick” trading system and then of course there was the “guru section”. Out of curiosity I approached a very well known guru and introduced myself. We had a nice conversation about his service. I then asked him why he didn’t just take his own advice and start a hedge fund. His answer was probably sincere but from my perspective it was laughable. He stated that so many people subscribed to his service there would be a conflict of interest for him to ACTUALLY follow his own advice. Boy is that a vote of confidence!

If a new trader wants to he or she can wave with Bob, season with Jake or Ring with Glen. At the end of the day trading success comes from hard work and dedication. Most important is the mental discipline required to follow one’s own rules. For those who want to follow the gurus just be prepared to “pay the piper” in more ways than one at the end of the day!