Alton Hill is a Cofounder at TradingSim. He has a passion to help people and found that one of his ways of doing so, is through the world of Day Trading. Alton’s skillset is in Product Development and Design Thinking which he uses to write and improve the overall experience for TradingSim.
Futures Trading Rooms – 7 Reasons You Should Stay Away
Futures trading rooms are probably the next step in the evolution of marketing hype that can entice the gullible traders for all the wrong reasons. In the world of online trading, there is no dearth of misinformation. From books to trading courses and well, trading rooms, without due diligence, it is quite easy for anyone to unwillingly fall prey to false information. This can be quite detrimental to one’s trading success especially if the pattern is caught quite early on.
The amount of choices that are available especially for someone who is new to trading can often lead to making false choices which lead to losing money rather than making money trading the financial markets. Even before one has dabbled in trading online, chances are that the lure of making it rich and the easy path to success have already blinded the potential trader. It is easy and perhaps understandable as to why one wouldn’t be tempted to take the easy route. No matter which market you look at, stocks or forex or even futures, it is not very difficult to miss out on the various advertisements screaming at you telling how easy it is to make money by joining the trading room.
If you have been wondering or thinking about joining a futures trading room either in expectations that you might make a fortune trading based off an expert’s trading calls or hoping to learn more by hanging out with other traders in the trading chat room, here are seven reasons why you should stay away from joining a futures trading room.
Table of Contents
What is a Futures Trading Room?
A trading room can go by many different names and is one of the main services offered by online trading signal services, e-learning courses and what not. A live trading room is often advertised as “The big thing” is sold to traders as a unique service where you get to see and trade in real time how the so called professionals trade.
For the gullible traders, depending on the way this is marketed, can turn out to be a very big deal. Many join in with honest intentions of attempting to learn how to trade by watching the professionals’ trade, but over time this is often replaced by laziness which results in most traders simply copying the trade signals than actually learning anything new.
Most of the online trading rooms are sold as something very unique and one that holds the key to your success. Therefore it is not uncommon to find trade rooms being advertised as, special emini futures trading rooms as an example.
In fact a quick search on Google for futures trading room or futures trading chat room will reveal tons of websites competing with each other to get your business.
A futures trading room can go by many different names. Primarily it is a community or an online chat service where the lead trader posts their day trading signals in real time. At times the lead trader can also talk about the trades that they have taken and are also expected to teach you a bit along the way.
A live futures trading room therefore will typically see a futures day trader telling you how to trade the commodity futures or the E-mini S&P500 futures contract in an emini futures trading room.
Still considering joining a futures trading room? Here are seven reasons why you should avoid them.
#1. High Subscription Costs
High Subscription Costs
Talking about subscription costs, the truth is that most live trading rooms are sold as exorbitant subscription rates that are open almost round the clock. Now if you happen to by just a part-time futures day trader, chances are that you will hang out at the futures trading room for just an hour or two per day and maybe few times a week. But, you still continue paying for the full subscription. In some cases, the trading room’s subscription fee is often bound with other services such as access to premium newsletters, and or exclusive content and so on, most of which are hardly used or offer not much value at all.
Depending on how the chat room is designed; it is not so difficult to get lost in the flood of messages, which can be daunting at times. In your few hours of day trading futures, would you prefer to spend that time sorting out the chat messages and trying to make sense of the markets or would you rather be trading?
In terms of the return on your investment chances are that you might just be ending up making the trading room a few dollars richer than anything else.
#2. Track Record
There are only a few futures trading rooms that can actually back up their claims by audited trading statements. But for the most part, the rest of the trading rooms are mostly hype with nothing concrete to back up their claims.
One of the reasons to stay away from trading rooms is the fact that there is no way you can validate the trade results. There have been instances where paying members often found themselves kicked out of a trading room for asking the right but uncomfortable questions.
In a trading room, you should remember that in most cases, there is a good chance that the rest of the traders are either hired by the trading room itself or merely a group of blind followers. In such circumstances, it can be difficult for you to point out to any discrepancies. Considering that most the online trading rooms tend to run on a subscription basis with many requiring a few months of upfront payment it can be difficult to get your money back even if you initiated a charge back.
With the latest tools and technology, it is easy for just about anyone to develop a fake trading statement and pitch it to potential traders or clients.
#3. Following the Trade Calls
No matter how closely you follow the trade calls, chances are that you will never get the exact prices with your broker. A few ticks of difference, including commissions and other fees can play a significant role in the trade’s profits. Instead of using pending orders, most of the trading in the live trading room is often done with market orders. Add some delay to the chat room and the fact that day trading is done on a 5 or 15-minute chart, there is a very strong chance that price action would have significantly moved away from the original trade call.
By simply following the trades that are called out in a live trading room, as a trader you don’t benefit much from it. Sure, there can be a few trades made here and there with some profits but beyond that you cannot expect to grow your futures trading account. Factors such as money management, doing the fundamental and technical analysis is often put to low priority when you join a trading room for the mere purpose of finding good trades.
#4. Trading Live vs. Simulated Trading
Trading Live vs. Simulated Tradnig
If you look closely and if you do get lucky chances are that you might notice that most of the trading screenshots especially in a trading room is often done on a simulated trading account. For the lead trader, this is absolutely no risk but for others who are blindly following the trading calls and replicating the same on their live trading account it can become a big risk especially if some of the simplest day trading rules is not followed.
Most traders on a live trading chat room try to do a fairly good job at hiding the fact of whether they are trading on a real or a live trading account or on a simulated account, making it very difficult to separate facts from fiction.
#5. The Trading Style
What many traders tend to miss out initially is the fact that trading styles can differ from one person to another. What works for one trader in no way guarantees that it will work for someone else. In a trading room, when you are following the trading calls made by the lead trader, chances are that you are just following the trades without applying your own due diligence.
This might not be an issue as long as there are profitable trades made, but a few bad losers (and there will be) will underpin the fact that if your trading style differs from that of the lead trader you would sooner than later start seeing failing trades.
A trading system or a strategy is highly individual and has its own personality. In the trading world, you cannot expect to see big results by blindly following someone else’s trades without understanding the basic logic behind such trades.
#6. Making Money by Selling Trading Rooms
What you may or may not know is the fact that it is a lot easier to make money selling chat room or trading room subscriptions than trading where one bad trade can potentially wipe out all your gains and even your trading capital.
It is often said that those who cannot trade teach. While this is debatable, think about it for a moment. Why would someone who claims to be an expert trader spend his time in running/maintaining a website and a live trading chat room alongside trading as well?
You can try this out yourself and chances are you will actually find out how difficult it can be. While it is possible that a trading room is run by a company which hires traders, it is still difficult than one can imagine when it comes to both trading and teaching at the same time. Somewhere down the line, either the teaching or the trading is bound to be compromised.
#7. The Disclaimer!
Saving the best for the last, take some time to read the disclaimer for the trading room that you have joined or want to join and chances are that the disclaimer will clearly put off any risks associated with the trading room set up and the resulting trade calls as your liability alone. This means that despite paying the monthly fees any losses that you incur are solely your responsibility. In most cases, you might have blindly agreed to these terms when signing up in the first place, which leaves you no access to taking any legal action whatsoever. At the end of it, you would have risked a significant sum, if not all of your trading capital alongside paying the subscription fees for nothing.
For the trading rooms, it is quite easy to get away with it by simply noting that you didn’t follow the trade management rules or it can be as simple as showing other trader’s statements where they made profits. In reality, you wouldn’t actually know whether the other members in the trading room were genuine or merely hired as shills.
While there are many more reasons why you shouldn’t quite be joining a trading room, at the end of it all, it simply comes down to expectations. Before joining any futures trading room, a question you need to ask yourself is why you want to join a futures trading room. Writing down the list of answers and then forming that as a checklist can help you to evaluate a couple of futures trading rooms such as reading the futures trading room reviews at various forums can help you to narrow down to the right place which matches your expectations.
A trading room can be a great place to network and chat with other like minded traders. However, if you are specifically looking out for trading rooms where you can get trading advice and even get a few free trading signals, chances are that you are quite likely to burn your trading capital quickly by simply following someone else’s advice.
Online trading rooms, chat rooms might not be a great place where you can really develop your skills as a trader, but they can help you find the right mindset of people and other traders. Consider yourself lucky if you do find someone who is willing to listen and also share tips and experiences, which in fact can go a long way than joining a futures trading chat room simply to find an easy way to make money trading the futures markets.