Is Tom Hougaard the real deal?

[TrAndy2022]

I think that specifically with this point, he trades one of those spread betting instruments that are available to people in the UK I think. This has tax advantages from what I remember, but I think this in no way has any impact on the underlying instrument. In fact, I see it when his fills seem to be far away from where the market was back when I was following him in real time.

I think its because even though the NQ or YM might still be at some level for a few seconds, the spread betters have already moved the market in their instrument. Its no different than major difference between the micro and mini contracts. They can sometimes be more than just a few ticks apart.

This also means he pays no commissions since the cost is in the spread. But since there is no impact to the NQ contract, if everyone follows Tom into the trade at the same broker, all it would do is give people worse fills in their spread betting account but not move the NQ itself.

If you mean that seriously that gives then arbitrage opportunities between such spread betting CFDs and futures markets. Really it can be ? I highly doubt this. It would be too easy to print money with limit orders (automated in a way).

 

[NoahA]

If you mean that seriously that gives then arbitrage opportunities between such spread betting CFDs and futures markets. Really it can be ? I highly doubt this. It would be too easy to print money with limit orders (automated in a way).

I'm sure there are enough algos doing this already. But think about it. If NQ is hovering at 15,000 and not moving, and yet Tom says he is buying, and then 1,000 all buy, but don't buy the NQ but instead their instrument, won't this cause that instrument price to go up? There are likely not enough sellers at that price for a much smaller instrument than the NQ.

But now you have to wonder who is right? If you buy at the equivalent of 15,005, hence getting a much worse fill, if it goes to 15,050 you feel good since you're in, but if instead NQ breaks 15,000, you have now bought the very top and paid too much.

So I don't see how you're going to print money just because of an imbalance.

 

[TrAndy2022]

I'm sure there are enough algos doing this already. But think about it. If NQ is hovering at 15,000 and not moving, and yet Tom says he is buying, and then 1,000 all buy, but don't buy the NQ but instead their instrument, won't this cause that instrument price to go up? There are likely not enough sellers at that price for a much smaller instrument than the NQ.

But now you have to wonder who is right? If you buy at the equivalent of 15,005, hence getting a much worse fill, if it goes to 15,050 you feel good since you're in, but if instead NQ breaks 15,000, you have now bought the very top and paid too much.

So I don't see how you're going to print money just because of an imbalance.

Simple as that. If others jumped in, in your example, then sell NQ CFD at 15005 and buy the 15000 price quote from NQ futures. Quick and sure profit. It cannot be or would not believe until I could see it myself. It would be too easy to make quick bucks without any risk.

 

[NoahA]

Simple as that. If others jumped in, in your example, then sell NQ CFD at 15005 and buy the 15000 price quote from NQ futures. Quick and sure profit. It cannot be or would not believe until I could see it myself. It would be too easy to make quick bucks without any risk.

If they are both equal weight, then doesn't one just cancel the other? You make money on the NQ, but lose on the CFD assuming NQ goes up to 15050.

Maybe I'm missing something.

 

[TrAndy2022]

If they are both equal weight, then doesn't one just cancel the other? You make money on the NQ, but lose on the CFD assuming NQ goes up to 15050.

Maybe I'm missing something.

You do not need the same size doing then the mass of 1000 traders are doing the move around the NQ CFD. Just take smaller size and trade the differences between NQ Future and NQ CFD. But I doubt this is profitable. So it cannot be what you described (as proof for arbitrage rule).

 

[Nagelis]

You bring up some valid points. Maybe forward this message to Tom for himself to read.

Thanks & good point. I might do. I think Tom will read this anyway or his assistants will surely do and alert him. I myself googled "Tom Hougaard reviews" and that´s how I ended up here, not having posted anything here for 13 years.

I was just interested what you guys / independent experienced index traders here are thinking about him. I myself am an FX spot / FX Swaps / Interest rate futures guy (retired top end institutional in the City ) but never traded indices apart from some side-trades for fun. Which is why I am trying to study more in detail what good index traders do. I came here 15 years ago to watch the S&P journal thread. Then got hired again and was forced to stay away from boards by compliance.

A few additional observations and thoughts.

1. If Tom have a marginal strategy, it's possible he could get a benefit from sharing his lagging signals as additional orders in his direction could move the market in his favor. I can only speculate, but if thousands of followers were copying his trades I'm sure it could move even a liquid market a few ticks or even points short term.

2. If Tom had a fantastic strategy (he doesn't), it would make more sense to be secretive, but from what I understand he's trading basic price action concepts, i.e., common knowledge and trading 101. As such, there's not much to hide, honestly.

3. I may be wrong and this is only speculation, but Tom is still a retail trader and I do not think institutional players have any interest in what he's doing and would not waste time trying to make money off his plays (either with him or against him). He's still a small fish in a big pond.

4. Performance issues. Posting live trades in front of an audience is generally a bad idea. Especially if you start performing poorly. Suddenly, you're more concerned about how you're perceived and being right - than actually trading the market. Typically, you'd let losses run and cut winners short. I would bet that this factor in addition to the flaws of his strategy is why he's having issues.

5. Keep in mind that volatility have been extraordinary for the last few years, so as soon as volatility is dropping a strategy that have been minting coin can easily go breakeven or even negative. Adding to winners is a good example as this generally requires a strong trend. In a range bound market adding to winners generally doesn't work, unless your add ons are very closely strung together and your initial entry was early. Which still generally works poorly due to the mean reversion nature of a range bound market.

I can see many reasons for why he's running that room. Trading is a lonely business and maybe it's his way of having some community. Or maybe he have ulterior motives. We can only speculate.

Unless someone was sharing something extremely worthwhile or consistently posting killer trades I wouldn't have any interest in hanging around in a trading room.

Many thanks for your detailed reply and insights.

• I have to be honest, I am intrigued by the fact that he can make 2 mio GBP per annum with an account of 100k. For a sole discretionary trader, it´s rare but not impossible. In FX I know several home trading guys who do it, but they are all systematic algo guys, with a minuscule latency advantage/edge and anonymous prime of prime access to the market so they can not be picked off (more on that later).

• Yes he is still a retail trader with pretty standard straightforward trading systems and logic and the combined volume of him and his followers may still be be small and meaningless in the overall market volume. In FX however, which is a de-centralized market (not a centralized exchange) the algos would pick up an almighty interest from retail traders (the best contra-indicators) at the same time and start trading against that (leveraged weak-hands) flow to trigger the scalpers-stops 30-50 pips away. It´s daily rinse and repeat there. I have been on the other side, so I know pretty well how it works. As long as there are no massive real-money flows coming into the market, the algo´s rule the waves for most of the time. What I want to say is, in FX, retail flow is very much WANTED by all these brokers, as its very easy to manipulate and trade off, that´s why there are so many brokers, it´s a gold mine for them this retail stuff. It´s also the reason why so many brokers make so much publicity in europe / asia / australia because the retail flow is so lucrative). I am trying to understand the dynamics in the index markets.

• So being "retail" in FX is looked down upon. How is it in index trading? Tom has mentioned he has learnt most of his skills / trading set-ups in the first versions of online trading boards such as Avid Trader (nowadays defunct), pretty much like Elitetrader today I would say, where some big heavyweight players were present with a wealth of knowledge to share. There used to be some big guys here too I seem to remember. So being "retail" outside FX for me does not necessarily mean useless. What I am saying is, there may be something valuable to be found in Tom´s trades, but I can not detect what it is lol.

• Fully agree on the posting live trades. I could not and would not want to do it. I´d rather trade alone with my cat and my dog. Like Bill Williams...

• I agree with your volatility point, and I believe Tom has also acknowledged that.
  
  I have no aim to discredit the guy. He is likeable, straightforward. I just wanted to see what the opinion is of other experienced traders who followed him what his true edge might be.

 

[Nagelis]

Could you tell me more about your passage about the broker, could sell any trader his trades or positions as signals under different names in FX trading, really ? I never heard that before. Also a broker can only do A-booking and not taking the same position 10 times or so. Or I am mistaken here ?

I can talk to you at length / in detail about that. But I will be brief here.

• For example, Tom himself has complained there are loads of scammers using his ID, his pictures (he even posted the scammers websites , marketing materials etc), selling his trading signals, even using similar telegram style messages. These scammers charge for exactly the same trading signals which Tom passes out for free. They even offer managed account services using his name, being him. These are presumably not brokers but proper scammers, although who would stop an offshore broker selling the same signals as being a private person?

• In FX (or any CFD market for that matter), if you sit as a system engineer or manager at a broker house and your back office systems / statistics pick up a consistently winning trader, this is an obvious potential gold mine. It is very easy for this broking house to just simply copy the trades (via a program to make no mistakes or just manually) for their own books, or in the name of a fictive client / spouse/ employee´s own account.

• Or worse, they (the broker) could just copy all trades of the profitable trader to an MT4 or MT5 platform (demo or real) and sell a copy-trading service. (MT4 and MT5 platforms are perfect to copy trades). There used to be several signal distributing platforms where some traders built up a following of 1000 traders, charging 50-100 usd per month to each follower... (they usually blow up, time and time again but often have picked up several months of nice income in the meantime).

• I have been told by insiders that this even happened with some FCA regulated brokers in London. For off-shore brokers, this is a piece of cake. Personally I do not trust any off-shore broker, and I would be very careful with smaller brokers anyhow.

So, it is not just a case of legitimate A- booking / B- booking and C-booking. Before the algo´s , when I was a market maker, we knew exactly which client to cover + follow / leave open (warehouse) the trades / double up or take the loss and follow immediately... Some (large) clients would always create an immediate loss for me, but I would still want to see their flow, even at a loss, because I knew with statistical significance it would go his way massively, so I cover double his flow. Of course, nowadays algos do the same in a much more sophisticated way now. All this is legit.

Where it becomes fraudulent is : what would stop a broker from open an automated copying system for themselves an/or selling signals others under a someone else´s name.

Even if a broker is "pure agency", so STP passing of the trade on to the market, they have systems that show which clients are statistically "interesting" and have some employee open an account for them all to benefit from. All this can be an edge of course.

 

[king1999]

Here are my findings FWIW.

Intrigued by hearing a lot about him, I have been following Tom´s live trading for several months now. I do firmly believe that Tom, as a person, is a solid, honest, straightforward guy. He does not charge anything to any one for the knowledge he shares, he does not have anything to sell other than his book (which costs next to nothing).

YET, there is something that does not feel entirely right in all his trading and associated activities, and I cannot quite put my finger on it. Here are some thoughts:

* If you have strong edge like he seems to have, why would you put it up for grabs to more than 25,000 followers, for free, not counting all the people that just take his (simple) strategies off his website?? Hell, there are even several scammers selling signals on the back of his trading (which he is aware of) , so there is for sure a large degree of proliferation going on which can cause a threat to his system´s long term profitability. The risk is, if his results are real, that some institutional traders follow the strategy for huge size as well.

If an edge gets proliferated / known to so many competing market participants, surely it will cease to be an edge quite quickly . This is what I cannot get my head around. Why would you put your bread and butter at risk in such a way like he is doing???

Consider the fact - which I am sure you all know - that Renaissance Technologies and Jim Simons are mega secretive about their edge which gives them just shy of 51% winning percentage. Tom seems to have around 61% winning trades.

* This concern I have should be even more valid if we consider scalping / day trading to be a negative sum game, so why would you do that, i.e. giving complete insight, shouting your edge in detail from the rooftops??


If the algo´s / market makers sniff out what Tom (and by consequence thousands of followers and same system traders) are doing , (btw, most of his trade set-ups are very simple, precise and objective, based on H and L of specific "signal" bars, not vulnerable to subjective interpretations), they would start to trade against these weak hands and make money by picking off / squeezing all these short term traders and trades ... (by the way, I believe this MAY be what is slowly unfolding now, as Tom´s track record is slowly but steadily deteriorating, he recently had a rare loss month and his YTD bottom line is much less than what it used to be).


* Next point: if many of these CFD brokers (such as Tom´s) would see their client is consistently profitable, they would simply start copying the trades via a simple program and get exactly the same execution price and P&L on their copied trades. Hell, they could be themselves quietly selling the signals under a different name. That is what happens in the FX markets. Needless to say, the same signal/trade risks getting proliferated even more and would destroy the edge even quicker.


* I wonder if /why Tom has not yet asked these questions himself and what his response would be. He clearly is very smart so why never talk about these risks? Could it be he is counting on a huge execution wave of flow which he creates himself and rides in the first place? What would be the max capacity of trading size that could be executed before it starts to distort the strategy?

* For a private/self trader his stake size is very high (200 GBP per point). You can only trade that size, if you have unwavering solid confidence in your edge and system (and/or sit on a large pile of cash so you can´t be too stressed about losing a boatload per day). The psychology fluff (meditation) around his trading may be valid to some degree but is quite vague and imho OTT and can not in itself account for the successful track record (if it is real). Some of the trading greats admitted they were scared with every single trade they took, yet that did not keep them from performing very well and could even be the reason why they performed well... So this psychology bit about eliminating fear remains a question mark as to how much it contributes to his success.


* OTHER RED FLAGS: What I do find strange is that he does NOT show his live trading on screen, we never get to see the executions on his platform, account balance, trade blotter. How do we know if it is real money trading? How do we know he does execute at the entry and exit he says? He never seems to suffer from any slippage, yet many of his followers do. There is no third party track record at all. I have seen Tom being attacked and threatened quite aggressively by disappointed signal followers as is also shown higher in this thread.

Like some others have mentioned already, he swears by his off-shore small broker. A bit strange. Not sure what to think of it.

* BOTTOM LINE. So perhaps, as far as I can see, his only true edge is indeed adding to winning (short term) positions, not the system or entry/exit signals in itself which - given the large stake size- needs a decent amount of confidence. So imho it´s the "position sizing" component which is the driving factor, mixed with a "psychological" factor which is hard to quantify.

Food for thought: looking at his numbers of losing and winning trades as published by others above, imagine what the outcome would be IF HE WOULD NOT add to winners, his success rate would be closer to 50% or even below 50%.

Edge comes in many ways. For individual discretionary traders, it is a combination of setups, position sizing, risk management and psychological makeup to follow through on the trades. The things Tom published may not even have any edge at all by themselves without his unique approach of trading. That’s probably why he doesn’t care about people stealing his methods.
By the way, adding to winning trades will not increase your win rate, and in fact makes it lower. But it will increase the reward to risk ratio, which will increase your profitability based on the trader’s equation.

 

[Sprout]

Thanks & good point. I might do. I think Tom will read this anyway or his assistants will surely do and alert him. I myself googled "Tom Hougaard reviews" and that´s how I ended up here, not having posted anything here for 13 years.

I was just interested what you guys / independent experienced index traders here are thinking about him. I myself am an FX spot / FX Swaps / Interest rate futures guy (retired top end institutional in the City ) but never traded indices apart from some side-trades for fun. Which is why I am trying to study more in detail what good index traders do. I came here 15 years ago to watch the S&P journal thread. Then got hired again and was forced to stay away from boards by compliance.




Many thanks for your detailed reply and insights.

• I have to be honest, I am intrigued by the fact that he can make 2 mio GBP per annum with an account of 100k. For a sole discretionary trader, it´s rare but not impossible. In FX I know several home trading guys who do it, but they are all systematic algo guys, with a minuscule latency advantage/edge and anonymous prime of prime access to the market so they can not be picked off (more on that later).

• Yes he is still a retail trader with pretty standard straightforward trading systems and logic and the combined volume of him and his followers may still be be small and meaningless in the overall market volume. In FX however, which is a de-centralized market (not a centralized exchange) the algos would pick up an almighty interest from retail traders (the best contra-indicators) at the same time and start trading against that (leveraged weak-hands) flow to trigger the scalpers-stops 30-50 pips away. It´s daily rinse and repeat there. I have been on the other side, so I know pretty well how it works. As long as there are no massive real-money flows coming into the market, the algo´s rule the waves for most of the time. What I want to say is, in FX, retail flow is very much WANTED by all these brokers, as its very easy to manipulate and trade off, that´s why there are so many brokers, it´s a gold mine for them this retail stuff. It´s also the reason why so many brokers make so much publicity in europe / asia / australia because the retail flow is so lucrative). I am trying to understand the dynamics in the index markets.

• So being "retail" in FX is looked down upon. How is it in index trading? Tom has mentioned he has learnt most of his skills / trading set-ups in the first versions of online trading boards such as Avid Trader (nowadays defunct), pretty much like Elitetrader today I would say, where some big heavyweight players were present with a wealth of knowledge to share. There used to be some big guys here too I seem to remember. So being "retail" outside FX for me does not necessarily mean useless. What I am saying is, there may be something valuable to be found in Tom´s trades, but I can not detect what it is lol.

• Fully agree on the posting live trades. I could not and would not want to do it. I´d rather trade alone with my cat and my dog. Like Bill Williams...

• I agree with your volatility point, and I believe Tom has also acknowledged that.
  
  I have no aim to discredit the guy. He is likeable, straightforward. I just wanted to see what the opinion is of other experienced traders who followed him what his true edge might be.

A development since 13 yrs ago are the rise of Dark Pools. If someone is trading size, they are gonna route their orders to those venues not a lit exchange.

It would be interesting to hear your stories of “The Algo” having being on “the other side.”

I am surprised though of your comment about your Compliance Dept making visits to an anon trading board off-limits.

 

[TrAndy2022]

I can talk to you at length / in detail about that. But I will be brief here.

• For example, Tom himself has complained there are loads of scammers using his ID, his pictures (he even posted the scammers websites , marketing materials etc), selling his trading signals, even using similar telegram style messages. These scammers charge for exactly the same trading signals which Tom passes out for free. They even offer managed account services using his name, being him. These are presumably not brokers but proper scammers, although who would stop an offshore broker selling the same signals as being a private person?

• In FX (or any CFD market for that matter), if you sit as a system engineer or manager at a broker house and your back office systems / statistics pick up a consistently winning trader, this is an obvious potential gold mine. It is very easy for this broking house to just simply copy the trades (via a program to make no mistakes or just manually) for their own books, or in the name of a fictive client / spouse/ employee´s own account.

• Or worse, they (the broker) could just copy all trades of the profitable trader to an MT4 or MT5 platform (demo or real) and sell a copy-trading service. (MT4 and MT5 platforms are perfect to copy trades). There used to be several signal distributing platforms where some traders built up a following of 1000 traders, charging 50-100 usd per month to each follower... (they usually blow up, time and time again but often have picked up several months of nice income in the meantime).

• I have been told by insiders that this even happened with some FCA regulated brokers in London. For off-shore brokers, this is a piece of cake. Personally I do not trust any off-shore broker, and I would be very careful with smaller brokers anyhow.

So, it is not just a case of legitimate A- booking / B- booking and C-booking. Before the algo´s , when I was a market maker, we knew exactly which client to cover + follow / leave open (warehouse) the trades / double up or take the loss and follow immediately... Some (large) clients would always create an immediate loss for me, but I would still want to see their flow, even at a loss, because I knew with statistical significance it would go his way massively, so I cover double his flow. Of course, nowadays algos do the same in a much more sophisticated way now. All this is legit.

Where it becomes fraudulent is : what would stop a broker from open an automated copying system for themselves an/or selling signals others under a someone else´s name.

Even if a broker is "pure agency", so STP passing of the trade on to the market, they have systems that show which clients are statistically "interesting" and have some employee open an account for them all to benefit from. All this can be an edge of course.

Are you justmaking assumptions and speculating about any fraudulent behavior ? Because what you said is not allowed. My trades are my property. If someone or the broker would sell my trades as signals I could claim them later (even years after) for missing gains etc. This is all illegal what you said above. So do you have any proofs that this actually happened in reality ?