Did Robert Hoffman really lose 312K in a single TF trade? Yikes!
- Thread starter Jreality
- Start date
fwiw: I have heard from good authority that the trade-advisory room industry is about to be scrutinized and regulated heavily.
In a nutshell, room traders such as Robert or anyone else working with their own real-money accounts are going to be looked at as pseudo money managers, aka promoting real trade suggestions to prospective clients.
That would bring them under CTA status, requiring Series 3 licensing and yearly audits of performance. Not a big deal there... except for the gray area that follows.
Live room subscribers can feasibly be considered managed funds clients following trade instructions given by the room owner = operator. If they are taking action in their accounts based on instruction or example of real-money trades, that falls under the description of suggested individual trades.
So then where does it end? Accounting for all client accounts in the live room to align with CTA managed funds annual requirements? Disclosure document of trade operations from the CTA to each trial subscriber? Paid subscriber? The list of open questions trails on from there.
I was strongly advised by industry sources not to operate a live room environment where the on-going central focus was/is live trades performance. It is suggested we are going to see regulatory agencies step on real-money traders with the idea that it crosses the threshhold of "education" and takes it clearly into the realm of managed money.
Personally speaking, I can see that concept myself. Trade advisory rooms that promote the concept of "take our trades" and earn while you learn" or any kind of "follow us" type enticement are affecting actual trade activity on a third-party basis.
The Al Brook's 'price action' room operation of marking charts and commenting on price action = trade ideas is an example of pure educational format. Anyone such as Robert Hoffman and others who trade real money AND/OR make suggestions to follow along and execute trades in any fashion due to instructions demonstrated won't fall under the educational exemption.
imo that will quickly and abruptly end ALL of the trade-along advisories that blow whistles, ring bells and what have you for trade signals issued to be followed by subscribers or even free trial users.
The end of that genre' may happen well before the end of 2011.
In a nutshell, room traders such as Robert or anyone else working with their own real-money accounts are going to be looked at as pseudo money managers, aka promoting real trade suggestions to prospective clients.
That would bring them under CTA status, requiring Series 3 licensing and yearly audits of performance. Not a big deal there... except for the gray area that follows.
Live room subscribers can feasibly be considered managed funds clients following trade instructions given by the room owner = operator. If they are taking action in their accounts based on instruction or example of real-money trades, that falls under the description of suggested individual trades.
So then where does it end? Accounting for all client accounts in the live room to align with CTA managed funds annual requirements? Disclosure document of trade operations from the CTA to each trial subscriber? Paid subscriber? The list of open questions trails on from there.
I was strongly advised by industry sources not to operate a live room environment where the on-going central focus was/is live trades performance. It is suggested we are going to see regulatory agencies step on real-money traders with the idea that it crosses the threshhold of "education" and takes it clearly into the realm of managed money.
Personally speaking, I can see that concept myself. Trade advisory rooms that promote the concept of "take our trades" and earn while you learn" or any kind of "follow us" type enticement are affecting actual trade activity on a third-party basis.
The Al Brook's 'price action' room operation of marking charts and commenting on price action = trade ideas is an example of pure educational format. Anyone such as Robert Hoffman and others who trade real money AND/OR make suggestions to follow along and execute trades in any fashion due to instructions demonstrated won't fall under the educational exemption.
imo that will quickly and abruptly end ALL of the trade-along advisories that blow whistles, ring bells and what have you for trade signals issued to be followed by subscribers or even free trial users.
The end of that genre' may happen well before the end of 2011.
Pretty much anyone who offers a service that promotes = suggest following along the trade calls for trading action will be taken apart at the seams.
Those that offer any suggestion of following along to trade the signals, trade the posted calls, testimonials that proclaim success following actual room calls issued, etc will fall outside the pure educational mode and be considered CTA status operations.
Personally, I have no doubt it will happen based on what I was told and from whom. The timeline remains to be seen.
I was looking for an analogy how other industries deal with similar situation. Maybe not the best one, but how about "How to" videos on Youtube? Recently I have been making some home improvements and I looked up several different things on Youtube, like tiling a bathroom and such.
Now, do I know for sure that the guy is a pro on Youtube? Am I guaranteed that my tiles won't fall off of the wall 6 months from now? Of course not. Actually, if you read the comments of certain videos, lots of commenters disagree with how the job should be done, stating that the videomaker doesn't know what he is talking about.
Where does that leave us, the viewers who is looking for advice? With caution and common sense. If you see the same type of job done the same way in different videos, chances are that is the right way to do so.
Of course financial matters are slightly different, but common sense and caution go a much longer way than hard to enact regulation....
As long as people believe that there is an easy way to make money, no matter what kind of regulation is enforced, there will be sheep to sign up for services...
Now, do I know for sure that the guy is a pro on Youtube? Am I guaranteed that my tiles won't fall off of the wall 6 months from now? Of course not. Actually, if you read the comments of certain videos, lots of commenters disagree with how the job should be done, stating that the videomaker doesn't know what he is talking about.
Where does that leave us, the viewers who is looking for advice? With caution and common sense. If you see the same type of job done the same way in different videos, chances are that is the right way to do so.
Of course financial matters are slightly different, but common sense and caution go a much longer way than hard to enact regulation....
As long as people believe that there is an easy way to make money, no matter what kind of regulation is enforced, there will be sheep to sign up for services...
Oh yeah, I forgot the most important thing against regulation:
You can not regulate against STUPIDITY and an inferior trading STRATEGY.
Guess what? Had Rob been regulated (he could have had a licence and posted profitable annual statements with real money) he still would have blown up!!! Why? Because his trading strategy was inferior.
Niederhoffer and LTCM both had the licences and years of profitable statements, but if you were unlucky to give them money at year 4, well, we all know how that ended.
So because I am curious, just how anyone imagines to regulate against a mentor blowing up???? Do you forbid using Martingale? Do you limit overleveraging??? Only proven strategies can be used? Who decides what is proven? etc.etc.etc...
You can not regulate against STUPIDITY and an inferior trading STRATEGY.
Guess what? Had Rob been regulated (he could have had a licence and posted profitable annual statements with real money) he still would have blown up!!! Why? Because his trading strategy was inferior.
Niederhoffer and LTCM both had the licences and years of profitable statements, but if you were unlucky to give them money at year 4, well, we all know how that ended.
So because I am curious, just how anyone imagines to regulate against a mentor blowing up???? Do you forbid using Martingale? Do you limit overleveraging??? Only proven strategies can be used? Who decides what is proven? etc.etc.etc...
Just recently a number of futures clearing firms have opted to decline new account applications from trade advisory operators who are not CTA status.
Also, I think the pending regulation changes are probably a result of those "join our service = follow our trades = qualify to trade our own capital" pitches being mass promoted.
When you have a tv informercial that claims how easy it is to trade Forex following room calls and qualifying yourself to trade the firm's capital in time, that builds some sky-high expectations in a lot of desperate people.
Same is true for the "prop-shop" facades that sell expensive training with promises to trade firm capital in the end that quickly fold. No doubt this new angle on signing the masses for fee-based services with promise of funds available has resulted in tons of consumer complaints. As they most certainly should.
I'd opine the CFTC / NFA is looking for blanket restrictions to halt any further attempts to promise mindless trading success with "trade alongside us and win" or "trade our money in the end" offers.
If that process unfolds as expected, it'll be just the pure educational services left to exist.
Also, I think the pending regulation changes are probably a result of those "join our service = follow our trades = qualify to trade our own capital" pitches being mass promoted.
When you have a tv informercial that claims how easy it is to trade Forex following room calls and qualifying yourself to trade the firm's capital in time, that builds some sky-high expectations in a lot of desperate people.
Same is true for the "prop-shop" facades that sell expensive training with promises to trade firm capital in the end that quickly fold. No doubt this new angle on signing the masses for fee-based services with promise of funds available has resulted in tons of consumer complaints. As they most certainly should.
I'd opine the CFTC / NFA is looking for blanket restrictions to halt any further attempts to promise mindless trading success with "trade alongside us and win" or "trade our money in the end" offers.
If that process unfolds as expected, it'll be just the pure educational services left to exist.
The potential regulations expected would pretty much negate the ability to promote "follow us" type trade-call services.
NFA could say that all new trials and subscribers must sign CTA disclosure documents and return to be held on file. They could audit email testimonials, could hold operators accountable for complaints from clients that didn't get filled where room signal was, instructions weren't clear enough or timely enough, etc.
In other words, it would pressure potential liability against trade-call advisors from a number of different directions. it'd be an end-around mode of results desired: discourage and shut down such operations due to inconvenience or liability versus reward.
How many trial subs want to read, sign and return CTA disclosure documents just to check out someone's trade calls for two weeks? How many trade-advisory owners want to face liability for loss from clients who followed room calls but could not execute profitably?
I'd opine that's the spirit with what may soon come to pass.
I'm doubtful. I really don' t think the "powers that be" really care about regulation and making the markets safer for retail. The SEC isn't around to protect retail, they're there to give the semblance that the markets are fair, which it is not. There are so many easier, bigger fish to fry, like HFT manipulation, etc, and they don't do that. The "follow my trade" markets are relatively small compared to the other problems. I sincerely doubt that regulators will do anything.
That being said, what about prop trading firms, where they call out trades for people in the middle of a massive trading room? What would be the difference between that and a live trading room? It seems like it would be a free speech issue, as long as they weren't telling people specifically to trade their trades. This is something Hoffman is good at skirting, so it seems like they might be able to avoid any problems in that regard.