Trade Stocks and Commodities with the Insiders
What a way to start an introduction to a book! Those scary words are just one of the current disclaimers the Federal Trade Commission (FTC) has proposed be prominently displayed by anyone offering an investment course to the public. Who can argue with that statement? Certainly not I. However, two points are missing here. The ﬁrst is obvious: if someone is losing money in the market, by the very deﬁnition, someone else is making money. Every dollar lost is a dollar won by someone else, hopefully you or me. There is another side of the coin the FTC does not want you to see: the potential for gargantuan proﬁts. Where else have millions been made, in less time, with less work and less dollars up front? What your mom or dad told you is correct. Without risk there is not much to be gained; risk and reward go hand in hand with each other. If there were no risk involved we could not have the potential for gain. To get rewards, we need risks. Duh! When the markets ﬁrst intrigued you, did you think it was possible to lose money? I sure thought it was, so the gummint men are just restating what we already know. Or are they just suppressive people at heart? The second point I have is even more egregious. How come I have to state the obvious in an ad I choose to run, while in today’s Investor’s Business Daily (IBD) the exchanges-backed “Options University” is not required to scare away would-be options players? Or why doesn’t a subscription to the Wall Street Journal, Forbes, BusinessWeek, or IBD come with the same warning? Why aren’t brokerage ﬁrms required to use these same words?
The only reason I know of is that this is a rigged business. The exchanges, the brokerage ﬁrms, and the large funds have set the table for themselves, created rules for themselves that are different from the rules for the smaller players in the game. There is one set of rules for what they can do and another for the average trader or adviser. Frankly, I have no problem with that. It’s their game, and they have the marbles. But we need to know of those differences to not get sucked into their game. To win at this game you need to not only know the rules but not be trapped into the fallacies. To that end let me expose a few of them.