An Interesting Take

Blame the Guru
A beginner entering the markets soon finds himself surrounded by a colorful
crowd of gurus—experts who sell trading advice. Most charge fees,
but some give advice for free to drum up business for their brokerage
firms. Gurus publish newsletters, are quoted in the media, and many
would kill to get on TV. Masses are hungry for clarity, and gurus are
there to feed that hunger. Most are failed traders, but being a guru is not
that easy. Their mortality rate is high, and few stay around for more than
two years. The novelty wears off, customers do not renew subscriptions,
and a guru finds it easier to earn a living selling aluminum siding than
drawing trendlines. My chapter on the guru business in Trading for a
Living drew more howls and threats than any other in that book.
MIND—THE DISCIPLINED TRADER 51
Traders go through three stages in their attitudes towards gurus. In
the beginning, they drink in their advice, expecting to make money
from it. At the second stage, traders start avoiding gurus like the
plague, viewing them as distractions from their own decision-making
process. Finally, some successful traders start paying attention to a few
gurus who alert them to new opportunities.
Some losing traders go looking for a trainer, a teacher, or a therapist.
Very few people are experts in both psychology and trading. I’ve met
several gurus who couldn’t trade their way out of a paper bag but
claimed that their alleged expertise in psychology qualified them to
train traders. Stop for a moment and compare this to sex therapy. If I
had a sexual problem, I might see a psychiatrist, a psychologist, a sex
therapist, or even a pastoral counselor, but I would never go to a
Catholic priest, even if I were Catholic. That priest has no practical
knowledge of the problem—and if he does, you want to run, not walk
away. A teacher who does not trade is highly suspect.
Traders go through several stages in their attitudes towards tips.
Beginners love them, those who are more serious insist on doing their
own homework, while advanced traders may listen to tips but always
drop them into their own trading systems to see whether that advice
will hold up. Whenever I hear a trading tip, I run it through my own
computerized screens. The decision to buy, go short, or stand aside is
mine alone, with an average yield of one tip accepted out of every 20
heard. Tips draw my attention to opportunities I might have overlooked,
but there are no shortcuts to sweating your own trades.
A greenhorn who has gotten burned may ask for a guru’s track
record. Years ago I used to publish a newsletter and noticed how frighteningly
easy it was for gurus to massage and slant their records, even
if they were tracked by independent rating services.
I’ve never met a trader who took all the recommendations of his
guru, even if he paid him a lot of money. If a guru has 200 subscribers,
they’ll choose different recommendations, trade them differently, and
most will lose money, each in his own way. There is a rule in the advisory
business: “If you make forecasts for a living, make a lot of them.”
Gurus offer convenient excuses to sleepwalking traders who need a
scapegoat for their losses.
Whether or not you listen to a guru, you’re 100% responsible for the
outcome of your trades. The next time you get a hot tip, drop it into
your trading system to see whether it gives you a buy or sell signal.
You are responsible for the consequences of taking or rejecting advice.

Dr. Alexander Elder