Every now and then I’d get a variation of an email like this. It’s a valid question so I thought I’d take some time to talk about it.

As you may know, I have a trading course (Icarus) that opens up to new members a few times a year.

The main reason I’m willing to teach this trading strategy is because of a special characteristic: it has a relatively large expectancy (of 14.4 pips at the time of writing). This means that every trade I take makes about 14 pips of profit on average.

 

The implication of this is that even if 500 people trade in the exact same way I do, it will not materially affect my own trading results. In industry lingo, it has significant capacity.

Due to non-linear transaction costs, the financial performance of a trading strategy decreases with portfolio size. […] When traders underestimate the number of competitors trading a similar signal, their performance is strongly negatively impacted.

In my view, the only objective reason a trader wouldn’t teach his strategy is because the more people follow the strategy, the less profitable it becomes.

This is not a problem with the Icarus method… at least, until the total notional trading volume approaches the vicinity of a quarter billion dollars (2,500 standard lots). That’s a back-of-the-napkin estimate, but you get the idea.

The next point relates to another characteristic of the Icarus strategy, namely that it’s a medium-term approach. With an average trade duration of 15 days, there’s quite a bit of “downtime” in my daily schedule.

Since I’m not actively trading all day, I can afford the time to create and update a trading course, among other things (such as writing this blog!)

So the bottom line of why I offer a course is because I have the time, and it doesn’t negatively impact my trading.

To me, it’s a simple decision. My two options are:

  1. Trade and don’t teach = less money
  2. Trade and teach = more money

I suppose if I were more lazy, I could have gone with option one and just sit on the beach all day sipping Mai Tais. Seriously though, I’ve tried it. And it’s boring as hell. I find that I’m the most fulfilled when working on something meaningful… but that’s a whole other story, perhaps for another time.

There are, by the way, many non-monetary benefits to teaching, such as being able to connect with like-minded traders, and helping people develop the skills to be financially independent. There’s no better feeling than seeing someone become a profitable trader and thinking, “I made a difference to the trajectory of his life”.

I believe the main reason people wonder about traders who offer courses, is because of all the charlatans out there, defined as unprofitable traders who sell trading courses.

To that point I’ll just say this: the simplest, most straight-forward way to tell a real trader apart from a charlatan is whether he’s willing to show (A) ongoing trading statistics from a (B) reputable broker that’s (C) tracked and verified by a neutral third party.

This measure alone will eliminate 99.9% of the pseudo traders out there.