How To Spot A Trading Cult of Personality
Beware of Cult of Personality (CoP)
In the 1800’s, the phrase “cult of personality” was first introduced. Although today it mainly applies to political figures, a cult of personality is someone who creates a worshipful image of themselves. Jim Jones was a classic example of a Cult Of Personality. Back in 1978, he convinced over 900 of his followers to commit suicide by literally “drinking the kool aid,” which was laced with cyanide. A Cult of Personality (CoP) is typically followed without question. In trading and investment circles, Bernie Madoff is a classic example.
Identify Trading Cult of Personality
In today’s world, these people acting as a trading cult personality usually show themselves on the Internet gathering Facebook likes and Twitter re-tweets. Not surprisingly, you can find many cult of personalities in the trading world. They can be nearly irresistible, offering the secrets of successful trading to the mortal man for a small pittance.
Trading Snake Oil Charlatan
But, of course, most of these people are simply snake oil charlatans, and should be avoided at all costs. Here’s how you can identify them, and escape their magnetic, charismatic clutches.
Look For Outlandish Claims
For any trading Cult of Personality, the bigger the claim, the better. Why should someone tout 25% annual returns with 10% maximum drawdown – which, by the way, is very good performance – when with a little exaggeration they can claim 200% annual return with 2% maximum drawdown? A typical equity curve of a CoP is this – no losses, no drawdowns. The CoP will make their performance look ridiculously good. 1 point profit is minuscule in their minds, but 10 or 100 points is much more reasonable.
The ironic thing is that most potential buyers of such a product won’t believe the CoP, anyhow. They know deep down that 200% annual return with 2% maximum drawdown is unrealistic, so they will discount it in their own minds. “If I get half of that return – 100% annual, with triple the drawdown (6%), I’ll be happy.” With the rationalization that they are being reasonable by adjusting the guru’s performance numbers, they now accept his fanciful claims, and Cult of Personality status is on its way. So, is even 100% possible? It is tough, to be sure, but it can be done.
Watch For Defenders
A few years ago, I attended a live webinar hosted by a definite trading Cult of Personality. His name is instantly recognizable to almost everyone in trading. With the room full, his webinar started, but his microphone was not working, and he did not realize it. I thought that as soon as I informed him of this via the webinar chat window software, others would confirm the fact and he would get the problem fixed.
Imagine my surprise when instead of other people verifying the lack of sound, I immediately got messages saying “leave the guru alone!” “he does not even need sound – he is doing great without it” and other similar comments. The problem, apparently, was with me – I was potentially “interfering” with his presentation, and the minions did not like that.
That is what a Cult Of Personality brings to the table – unwavering devotion from fans and customers, even when there is clearly an issue.
The staunch defenders of Cult Of Personality educators are also apparent in online review sites. Just take a look at negative book reviews on Amazon.com. If other customers comment on the bad review by attacking the initial reviewer, you’ll know you are dealing with a cult figure. Trading review sites like futures.io or tradingschools.org show the same pattern of behavior – reviewers who give bad ratings get personally attacked by loyal followers of the CoP.
Another place to look for defenders is in trading rooms. Some trading room and conferencing software allows “puppets,” fake trading room members controlled by the guru or a trusted client. The puppets are sometimes tough to spot, except for their behavior. Almost every comment they make will have one primary objective: to make the CoP look infallible. As with review comments, this aura of infallibility typically is best accomplished by attacking the non-believer.
Here is an AWESOME song and video on the subject:
Look For Outlandish Claims
For any trading Cult of Personality, the bigger the claim, the better. Why should someone tout 25% annual returns with 10% maximum drawdown – which, by the way, is very good performance – when with a little exaggeration they can claim 200% annual return with 2% maximum drawdown? A typical equity curve of a CoP is this – no losses, no drawdowns. The CoP will make their performance look ridiculously good. 1 point profit is minuscule in their minds, but 10 or 100 points is much more reasonable.
The ironic thing is that most potential buyers of such a product won’t believe the CoP, anyhow. They know deep down that 200% annual return with 2% maximum drawdown is unrealistic, so they will discount it in their own minds. “If I get half of that return – 100% annual, with triple the drawdown (6%), I’ll be happy.” With the rationalization that they are being reasonable by adjusting the guru’s performance numbers, they now accept his fanciful claims, and Cult of Personality status is on its way. So, is even 100% possible? It is tough, to be sure, but it can be done.
Watch For Defenders
A few years ago, I attended a live webinar hosted by a definite trading Cult of Personality. His name is instantly recognizable to almost everyone in trading. With the room full, his webinar started, but his microphone was not working, and he did not realize it. I thought that as soon as I informed him of this via the webinar chat window software, others would confirm the fact and he would get the problem fixed.
Imagine my surprise when instead of other people verifying the lack of sound, I immediately got messages saying “leave the guru alone!” “he does not even need sound – he is doing great without it” and other similar comments. The problem, apparently, was with me – I was potentially “interfering” with his presentation, and the minions did not like that.
That is what a Cult Of Personality brings to the table – unwavering devotion from fans and customers, even when there is clearly an issue.
The staunch defenders of Cult Of Personality educators are also apparent in online review sites. Just take a look at negative book reviews on Amazon.com. If other customers comment on the bad review by attacking the initial reviewer, you’ll know you are dealing with a cult figure. Trading review sites like futures.io or tradingschools.org show the same pattern of behavior – reviewers who give bad ratings get personally attacked by loyal followers of the CoP.
Another place to look for defenders is in trading rooms. Some trading room and conferencing software allows “puppets,” fake trading room members controlled by the guru or a trusted client. The puppets are sometimes tough to spot, except for their behavior. Almost every comment they make will have one primary objective: to make the CoP look infallible. As with review comments, this aura of infallibility typically is best accomplished by attacking the non-believer.
Here is an AWESOME song and video on the subject:
CoP Trading Mistakes
Why?
So why do these Cult Of Personality trading educators exist? Obviously, they have convinced enough people over the years that they are experts in the field, and above reproach. The secret with the Cult Of Personality is in his ability to generate so much false confidence in his trading materials that people go from feeling duped to being staunch defenders. This is almost akin to the Stockholm Syndrome with kidnappings, where the kidnapped person sympathizes and even defends the kidnapper. This phenomenon is obviously great for luring in new unsuspecting fish.
How To Avoid Trading Cult of Personality
How can you be sure that you don’t fall victim to a Cult Of Personality? Table 1 gives some resources to check on potential investment CoPs. First, be skeptical of everything you see or hear. These people thrive on outlandish claims, so the adage “if it looks too good to be true” definitely holds true here. Second, check the Internet for reviews of the CoP’s work. Maybe you will not find any bad reviews out there, and that is not necessarily a bad thing.
Some educators don’t generate poor reviews because their product is very good. The thing to watch out for is poor reviews, with rebuttals or comments questioning the reviewer personally, or the reviewer’s motives or integrity. These vicious “reviews of reviewers” are typically written by one of the CoP’s devoted charges, or even by the educator himself. Many CoPs will give their customers a free month in their trading room for attacking or rebutting any poor review.
Some educators don’t generate poor reviews because their product is very good. The thing to watch out for is poor reviews, with rebuttals or comments questioning the reviewer personally, or the reviewer’s motives or integrity. These vicious “reviews of reviewers” are typically written by one of the CoP’s devoted charges, or even by the educator himself. Many CoPs will give their customers a free month in their trading room for attacking or rebutting any poor review.
Protect Yourself From Trading Cult Personality
Finally, contact the educator you are interested in, and ask some questions. If you get answers that seem evasive, standoffish or non-revealing, you can quickly conclude that you are dealing with a CoP. For example, the question “do you trade this method with your own money, and could you show me proof?” is always a good one to ask. If you get an indignant reply in return, you are likely dealing with a CoP.
Another great question to ask is “if your trading method is so great, why do you sell it?” Cults of Personality types will frequently respond to this in anger, rather than just honestly answering the question. Truth be told, there is nothing wrong or shameful about selling trading information or systems. What is wrong is disguising the true reasons for selling the information. Most CoPs sell trading material because they simply cannot trade!
By the way, some great tricks of CoPs can be found in my article on trading mistakes.
And if you are looking to buy an algo trading system, make sure to check out my article on the perils of buying an algo system.
Buyer Beware
Nowhere is the term “caveat emptor” – buyer beware – more appropriate than with trading vendors. The marketplace is filled with dishonest and unscrupulous vendors, with a few good ones thrown in for good measure. Discerning between the two groups is sometimes trivial, but other times can be very difficult. Recognizing when a trading figure is a Cult Of Personality is just one step in the due diligence process. Avoiding vendors that show CoP tendencies is a very good way to avoid trading mis-information.
About Author: Kevin Davey is an award winning private futures, forex and commodities trader. He has been trading for over 25 years.Three consecutive years, Kevin achieved over 100% annual returns in a real time, real money, year long trading contest, finishing in first or second place each of those years.
Kevin is the author of the highly acclaimed algorithmic trading book "Building Algorithmic Trading Systems: A Trader's Journey From Data Mining to Monte Carlo Simulation to Live Trading" (Wiley 2014). Kevin provides a wealth of trading information at his website: http://www.kjtradingsystems.com
Copyright, Kevin Davey and KJ Trading Systems. All Rights Reserved. Reprint of above article is permitted, as long as the About The Author information is included.
Kevin is the author of the highly acclaimed algorithmic trading book "Building Algorithmic Trading Systems: A Trader's Journey From Data Mining to Monte Carlo Simulation to Live Trading" (Wiley 2014). Kevin provides a wealth of trading information at his website: http://www.kjtradingsystems.com
Copyright, Kevin Davey and KJ Trading Systems. All Rights Reserved. Reprint of above article is permitted, as long as the About The Author information is included.