The Zombie Traders

What the fuck is a Zombie Trader? No, it’s not a day trading educator that teaches how to eat the meaty corpse of the market. And it’s not a ‘live trading room’ where the moderator pumps a low float penny stock, and then quickly sells it to his subscribers.

Although, the penny pumper, live trading rooms certainly seem very much like financial cannibalism. Simply because the penny pumpers in the live trading room are eating the account balances of the subscribers.

No, these are not the Zombie Traders of which I describe. Instead, a Zombie Trader is the term that I use to describe individuals that are stuck in the seemingly never-ending cycle of trading on a simulator, and hoping to be paid for it.

The Simulator Hustlers

The simulator hustlers are, of course, the multitudes of companies that are offering “we will give you trading capital” and “free money” nonsense.

Some perfect examples would be TopStep Trader, OneUp Trader, TradeNet, Earn2Trade, etc. etc. etc.

Please forgive me for not providing a complete list. There are now so many of these “free money” and “we will fund your trading account” schemes that I can hardly keep track.

Anyway, the ‘opportunity’ is all basically the same. You pay a monthly fee, trade on a simulator, and if you successfully trade on the simulator, then you get to keep a portion of the profits, that is earned on a simulator.

Over the past several years, it has been fun watching and writing about the multitudes of companies that have quickly appeared and then just as quickly disappeared.

Some of these companies are better than others. And some are just plain awful. But its a niche that is not going away, and so, as a writer and reviewer…the best I can do is proffer my little opinion.

Truth be told, I personally know nearly every gangster in this niche, so writing negative content is a bit more complicated. But I shit on everyone, and everyone expects that, so feelings are usually bruised for only a short time.

Today, I wanted to write about a person that really burned the “Simulator Hustlers” and took them down for a nice chunk of money.

And I wanted to give you a warning. Specifically, why trading on a simulator, in certain situations, are actually quite harmful to your long term development.

Meir Barak, TradeNet and TEPS Trading Program

If you have spent any amount of time on YouTube, then you have probably come across Meir Barak. He supposedly wants to teach you how to trade. For a fat fee.

Once he “teaches” you how to trade. Of course, he wants you to open an account with TradeNet, and participate in the TEPS Trading Program.

Basically, you are giving Meir Barak $5k to $50k and he then converts the money into “credits” which you then use to speculate on a trading simulator. He owns the trading simulator.

If you are really lucky, you might actually win some money on the ‘video game’ trading simulator. Meir pays you as a “trader” through the TEPS program.

The key to remember is that when you actually win on this goofy simulator, then Meir loses. So he is betting that you will lose, and lose badly. If you win, then his company must pay your winnings. It’s a classic bucket shop.

But what if a trader figures out a way to game the system? What if he finds a flaw in the ‘video game’ and takes Meir for a wild and unprofitable ride? That’s where things get interesting.

Trader “A” finds a flaw and exploits it.

Recently, a trader contacted me with such a story. I found it funny and clever and wanted to share his story.

He did not want to use his real name, so we will just call him/her trader “A.”

Trader “A” is not a newbie trader. He has been designing automated computer trading algorithms for many years. He has also worked as a computer programmer and part of his day job is creating short cuts for comparative pricing in the automobile insurance market and the travel niche.

He knows how to find flaws in information systems. And trading simulators are the ultimate information systems.

Anyway, he created an automated strategy that quickly attempted to scalp illiquid stocks DURING a massive volume spike. The key is DURING a massive volume spike. As he describes, simulators can be easily fooled when they are suddenly flooded with large amounts of data.

During the first couple of weeks with TradeNet, he quickly discovered the flaws in Meir’s video game and was able to “scalp” Meir Barak for a few hundred dollars. He knew this amount would not set off any red flags.

In the ensuing four weeks, he upped the trade size and really started peeling out money. Though I cannot be absolutely sure the total amount, he describes it as +$25k in profit, with little effort.

He next attempted to pull his money out. No problem. Meir paid up. Every good bookie needs to always pay his losses. But how long would his little scam keep going?

Game Over

After he got paid, he went “back to the well” and attempted to drain Meir’s wallet once again.

However, he quickly discovered that his “strategy” was no longer working. The orders were not getting filled. And so, he contacted TradeNet and asked: “What’s going on, my orders are no longer getting filled?”

The TradeNet rep responded that they had connected his account to a live data feed and a live trading account. In other words, they had converted him out of a trading simulator and into a live, real market trading environment.

Once he was converted into a live trading environment, then he knew the game was over. The “real” market requires a counterparty to all trades. A trading simulator does not.

Of course, he already knew that his automated strategy would not work in a “real” market because there simply was not enough volume to support the hyper buying and selling. But he knew that he could game the simulator with a few clever tweaks.

Why is this important?

The first reason is that it’s great to see a bucket shop take a hit. Nothing better or more enjoyable than taking money from these nerds.

The second reason is that trading on a simulator is just a big fat lie. Especially on thinly traded stocks, futures, or Forex. A simulator will appear to replicate market dynamics, but the hard cold reality is that the subtle differences are the differences that will destroy you, or make you fabulously wealthy.

Recently, I interviewed Steven Dux and he laughed at the idea of using a simulator. In his own personal journey, he described this exact situation. A situation where he thought he had a winning strategy and had spent much time and effort perfecting it — on a simulator. Only after he attempted to live trade it, he quickly discovered that he could not get his orders filled.

Think about that.

There are no professional simulated traders

If you are currently stuck in the never-ending cycle of simulated trading — you are a zombie trader. You are going nowhere. You are just a dull-eyed nitwit that is being charged hundreds of dollars each month, with the sad dream of being a “real” trader.

What is the best route for the newbie trader? Firstly, you need to avoid simulators. They just don’t work.

The best option is to open a small account (preferably a few hundred dollars) that you can afford to lose. Nearly all of the brokers are now offering $0 cost commissions, so why not just take the plunge and trade stocks or leveraged ETF’s?

With $0 cost commissions, you can now afford to actually test your opinions against real market participants, and your losses will be minimal.

Plenty of traders mistakenly believe that the first step is “I need a big trading account.” This is absolutely wrong. The first thing you need is to forget about your account size and get your feet wet.

Try taking a few trades, experience the emotional highs and lows, and savior just how difficult this game really is.

Wrapping things up

Thanks for reading. In a couple of weeks, I have another article about a Futures trader, and how he “burned” one of the Futures “we will fund your trading account” companies for $15k.

It’s a fun and clever story how he pulled it off. Yet another glitch on a simulator got exposed. But the “sugar high” was only for a couple of weeks -they caught onto his little scam.

BTW, if you have ever participated in one of these “funded trader” schemes, would love to know your experiences? Please comment below.

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Ken
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Ken

Well-written article, Emmett. Your points make sense. If it sounds too good to be true… + imho funded account schemes, like joining a prop shop, kill traders’ accounts with lots of costly fees (data/platform/mandatory training/inactivity etc) and should be avoided at all costs. + agree re sim trading to a degree; main value is to use sim to test out new ideas briefly to improve them, before live. Your point re small acct/small size/zero commish is on target; you can’t learn discipline/emotional control on sim. biggest disconnect is traders sim-trading big paper vs smaller real trades; free commisshes are a… Read more »

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“An entertainer, trading hustler, and performance artists that have spent the past 17 years convincing the gullible and naive into purchasing his ridiculously corny trading products.”
” Ken Calhoun is long time salesman of trading systems, courses, advisories, software, etc. Has been selling trading “wet” dreams since the late 1990’s. Onward he continues to dance, sing, and entertain the masses with his stories of day trading glory and day trading lifestyle. Has he ever traded successfully? Yes. He is certainly not the world’s greatest trader, but at least some of his trading records are verifiable.”

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Igor
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Igor

Great Article.