Being a "guru" necessitates a measure of control, by definition. Some people want to pay for advice. There is nothing necessarily wrong with paying someone else to come up with answers for you.
In fact, in the business of stock picking, it's not hard to find money if you are making good picks.
If a problem develops, it's usually due to one or both of the following factors: the guru gets cold, or the guru steps out over the edge on the control factor. If you're being paid for giving advice, both of these developments are unhealthy.
In the case of the former, it's not uncommon for someone to have hot and cold streaks. In a market that was trending up for two or three years, there were many TA models that were working quite well on a 'backtested' basis - meaning that you could 'verify your TA model was right' by just looking back for two or three years. If the overall market decides to change its mind on direction, there are lots of these 'works well' models that suddenly don't work so well. I don't know if that is the case here, because I don't know what jenna's model(s) are/were. I do know that they were pretty complex and sophisticated, which can be a negative factor if some of the basics change.
The latter, stepping out over the edge on control, is a bit more easy to read. You have to remember that there is an element (albeit different from individual to individual) of the "I need someone to control things for me" attitude with people who pay for advice. Again, this is not necessarily a bad thing; people don't do eye surgery on themselves.
Another factor of allowing someone else to make your decisions is that it allows you to assert that it is not your fault if they screw up. This is one of the reasons why ignorant investors will try to sue their stockbroker if they lose money. If they MAKE money, they are a genius, if they LOSE money, it's the broker's fault. In this way, they avoid being responsible for losing the money. Every client is different, everybody has different things they want to do, different amounts of risk money, different attitudes. Licensed brokers can lose their license or even go to jail if they screw up on the "know your client" rule, but gurus are not bound by such regulation.
Gurus have different ways of dealing with these factors. Some gurus use enough subjunctive language or missing information so that they can get out through the back door on a call that goes bad. On the other hand, some will just fess up and say they screwed up and made a bad call. The problem is that if you admit you made a mistake, then you are theoretically opening the door for someone to attack you legally. I'm talking as much about thought process as I am about anything else here.
Very few gurus, in my experience, will educate their clients about what they are doing exactly. There are three possible reasons; they don't want to paint themselves into a corner because they don't know what they are doing, they understand that the client has no desire to be educated, or they have some sort of system or strategy that is proprietary. I guess that usually it's a combination of these factors.
Anyway, at some point, if the guru is not paying attention, he or she can slip into the "I know what's best for you even if you don't" mode. It's not hard to get into that mode if hundreds of people are paying you tens of thousands of dollars every month to be led by you. What can follow after the "I know best" thing is the "I'm a genius and you're an idiot" computation. Once that happens, then anyone that attacks the guru's credibility for any reason becomes "the enemy". Everyone is an idiot, but the bad idiots are attacking and the good idiots are paying you.
Personally, I think the best way to address the issue is to have one's investment parameters specifically and precisely codified, in writing, for every client or potential client to see. A guru does not have to give away all his or her secrets...(many savvy traders use some tricks that they don't want anyone else to know about) but there's nothing wrong with publishing the general rules that you follow for investing, such as reward/risk parameters and so on.
Naturally that presupposes that the guru actually has a plan. <G>
Above all, anyone who is in business should have the goal of remaining professional and acting in a professional manner at all times. Rants, misspelled words, cryptic messages...all that stuff is just not professional. Any investment strategy has to have discipline, and professional behavior is just part of the discipline.
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NINE RULES FOR SUCCESSFUL TRADERS
© Pirate Trading 2001 (may not be reproduced without express permission)
1. Cut your losses and let your winners run. Corollary: Be willing to make more than you are willing to lose. Corollary: You can let your winner run and take a profit at the same time if you get out of part of the winning trade the first time the stock retraces. Corollary: It's OK to add to a winning position. Corollary: Know your reward/risk ratio before you make the trade. Corollary: Maintain a tight stop on every average up or average down and exit that position the moment the market tells you you're wrong. Corollary: Take a small loss before you have to take a big loss.
2. Let your strategy fit the stock - don't try to force a trade into your strategy. Corollary: Let the trade come to you, don't force yourself into a trade that you don't like.
3. Only play with what you can lose.
4. Get the right entry point and the exit point will take care of itself.
5. Exit a long position when you would go short. Exit a short position when you would go long. Corollary: If you are short and wish you were long, or long and wish you were short, exit the trade.
6. Learn something every day. Corollary: The lucky smart people will eventually take the money from the lucky dumb people. Corollary: Don’t assume you are smarter than the person on the other side of your trade. Corollary: If you don’t know who the fool is, the fool might be you.
7. Look at what is happening, not what you thought should have happened or what you think might happen. Corollary: The market doesn’t care if your account is up or down on the trade you are in. Corollary: If you can't read the chart, don't trade the stock until you can. Corollary: “Know” is good. “Don't know” is OK. “Think” is dangerous. “Believe”, “Hope”, and “Fear” usually cost money.
8. Don’t trade on emotions. Corollary: Leave psychology for the rookie that is taking you out of your winning position. Corollary: If you must be emotional, then fear a loss and hope for a profit - don't hope for a smaller loss and fear a smaller profit.
9. Make your own rules and stick to them. Corollary: You can break your rules and get away with it until the time you don’t get away with it. Corollary: The more rules you break, the riskier the trade. Corollary: The money goes to the guy with the best plan. Corollary: If you consistently break a rule and win, change the rule. |
