A lot of people around me spend time trading on the stock market. Some trade crypto, some trade stocks, others trade currencies. Some call themselves investors, others call themselves traders. I often see random passersby in various cities and countries checking their trading terminals on their phones or laptops. And at night I sometimes write analytical or backtesting software—well, I did up until recently. All these people share a common faith and a set of misconceptions about the market.
Market Misconceptions
There are many misconceptions about the market. Almost all the information available in the world about it can be divided into:
Dry facts or forecasts already priced into the market, which carry no profit opportunities,
Misconceptions,
Falsehoods packaged by marketers or scammers in a fancy wrapper so that you’ll give them your money.
I learned about trading at 19. I accidentally ended up at some Forex course, and that’s where I realized that everything the lecturer was explaining could be automated.
Step 1
I quickly figured out how to program and, within a few months, scripted all the algorithms and patterns described in their training materials, then tested them historically, but they didn’t work. The lecturer said I needed to add additional indicators for verification. I added various indicators/oscillators, but the algorithms and patterns still didn’t work.
Step 2
I started looking for “better” trading literature. It described complex trading strategies, of which I could only manage to code about 80%, but I eventually mastered even that: over a couple of years I tested practically everything I found, and none of it worked.
Then I decided to deviate from the recommended strategy parameters and brute-forced all possible parameter settings. To do this, I had to learn multithreaded programming and set up a home server that ran 24/7, cycling through different parameters, parameter combinations, and strategy combinations. Even then (around 2012), I came up with splitting historical data into test data plus two validation segments, smoothing out the equity curve, and other techniques that weren’t widely discussed at the time.
In the end, I always got the same result: no working strategy existed. Any stable historical profit curve was a result of overfitting and was not confirmed when the trading algorithm was run live. My conclusions turned out to be universal and applicable to everything:
Everything has its own life cycle.
The fact that something worked up until now doesn’t mean it will continue to work in the future unless there are solid fundamental reasons. For example, if a car is moving forward at 100 km/h, it will likely continue moving forward in the next moment because it has significant momentum, and there’s nothing on the road to stop it. On the market, that momentum can be overturned at any time by a big fund that decides to close or open positions and halt the movement.
Even long-term investing, say in the top U.S. companies index (as Buffett recommends), may disappoint investors. Just because it worked in Buffett’s time doesn’t guarantee it will earn money in the future. By the time you retire, the U.S. might be considered a country with Italy-level issues, flooded with problems (and Americans do have plenty), everyone might be learning Chinese instead of English, and those who invested in the U.S. might not recoup their investments. But let’s not dwell on that right now.
Step 3
I branched out in different directions—sometimes extremes—in my quest for a working algorithm:
For about a year, I tracked forecasts from popular financial analysts on TV and online. In the long run, they were correct 50% of the time, meaning they were not competent. They only appeared convincing because they used fancy words tied to real events: you see the event unfold, recognize it as true, and automatically accept both the explanation and the subsequent forecast. In reality, the explanation is often wrong, and the forecast, which only comes true half the time, is basically “garbage.”
I created my own market expectation analysis system, which worked with mixed success, but then it issued several incorrect recommendations in a row, losing half the profit I’d made in a year, so I abandoned it.
Once, I got “exclusive investment recommendations from analysts at one of the country’s leading banks, for VIP clients only” from a friend. He had access to them for two years because he had a large account at that bank. I compared the forecasted share prices with actual results over the two-year period and saw that these forecasts also came true half the time and failed the other half. So, the bank’s “exclusive” forecasts didn’t work.
I tried my own software for stock trading strategies.
I tested at least 100 more ideas, including:
measuring the impact of order distribution in the order book,
analyzing trade flow,
writing arbitrage bots,
analyzing traders’ chat messages for general expectations and impulsive behavior,
diving into some far-fetched methods of spectral analysis of non-stationary processes (for which I derived my own formulas, and then wrote software to handle them because they were huge), never figuring out if they worked because my code was resource-intensive, my backtest data was limited, and noise distorted the constant component I was trying to find,
and even experimenting with illicit substances—something I strongly do not recommend to anyone, for the sake of your mental health, physical well-being, and legal safety. Moreover, such experiments won’t yield any practical trading insights, but the chances of ending up in an institution, “sliding through the space of possibilities” toward your goal, definitely increases.
I spent about 10 years on these quests, sacrificing everything (studies, work, relationships) while honing my ability to code quickly and validate hypotheses. I began to see real life as somewhat unreal, and trading as the real world. I believed that eventually, I would succeed, inspired by stories of people who’d made it by age 40, and I kept pushing back the timeline for when my “real life” and the reward for my years of effort would finally come. When I started trading, I thought success would come in six months to a year, but that estimate always stayed the same—pushed forward or backward by a few months.
I integrated trading into my life as tightly as possible: I always carried a phone with a trading terminal, and when I worked in an office, I kept my monitor at the lowest brightness so my colleagues wouldn’t see the trading terminal. I only worked intensively during remission periods or when my boss told me that I’d been performing poorly for months and would be fired if it continued, or when I sensed that conversation would happen soon.
But I kept working. Despite the issues, at all my jobs I was considered one of the best employees (except a couple of times where the conditions were especially poor or the team was terrible). I was never wanted to be let go when I resigned, and as I got older, I led ever more significant projects. I started my career as an account manager at a web studio, went through freelance development and running a small web studio, and ended up as an IT project manager in a large state corporation, then left to nowhere, tired of the bureaucracy and idiocy, realizing I didn’t want to climb that career ladder. I returned to development via a copy-trading startup, which I built entirely, but when it closed down (the analysts and organizers were incompetent and lost the investors’ money), a team of advertising arbitrage specialists picked me up because they liked how I turned their ideas into code. A year later, I left them too, partly because they started making apps for gambling. Now I work at another company, handling almost all the IT aspects, devising and implementing unique solutions to make the company more competitive. In my spare time, I launch mini-startups for myself and friends. Both there and here, my ability to rapidly test hypotheses, quickly create prototypes, and solve technical problems has been invaluable—skills I’ve honed over 15 years of “trading research.” I’m now working on improving so that new opportunities open up for me in the future. I’m also addressing my weaknesses, which has been particularly hard.
However, there’s a problem. I still don’t see this real world as truly “real.” A couple of weeks ago, I was invited to join another company that promotes gambling apps. I made it clear that I wanted a more ethical way to earn a living, although sometimes I’m uncertain about that myself. I turned down the offer. We had a pleasant conversation, and the person interviewing me shared that her father is a gambling addict—he lost his apartment and feels no shame, still plays. She mentioned it as if to justify that people like him might even deserve to be lured into gambling. But I just saw in him a lost soul, much like myself, to whom this world isn’t real.
I’m currently in a remission phase. The periods in which I code and don’t code are growing longer. For the past year and a half, I was coding with only small breaks, and here’s some of what I did:
I monitored 10,000 copy traders in real-time, looking for those who actually know how to trade: https://habr.com/ru/articles/808635/
I analyzed trader transactions on the Ethereum (ETH) blockchain to find competent traders (given that copy trading on centralized exchanges doesn’t work)—the result was similar, so I didn’t write an article about it.
I tested several hundred promising indicators, either from quant fund publications or my own ideas.
I experimented with news analysis via large language models.
I toyed again with automatic parameter combination searches, using my new knowledge. I briefly looked into modern reinforcement-learning libraries like FinRL, but didn’t dive deep because I believe I can get similar results without reinforcement learning, and it’s not what I’m after.
I tried many other things, but these are just the ones that come to mind.
I’ve done quite a lot. Right now, I’m out of ideas and don’t really feel like brainstorming more. It seems I’ve tried everything in my life and am now saturated—even oversaturated—with this search. At such times, I gain temporary clarity, and I see that there is no answer to my question. The thousands of programs I’ve written have shown there is no trading algorithm that generates relatively stable profits without a major drawdown when the market falls. All algorithms, including those used by big market players—reinforcement learning, multimodal large language models, etc.—can only outperform the market by a few percentage points per year. So if crypto crashes by 80% this year, the good funds in that sector will lose 60–70%. That’s not what I was looking for. Sure, someone might profit during a crash, but they might later lose that money on a rising market in the most ridiculous way. Searching for arbitrage opportunities (like beating a third-rate exchange via latency) is a different business and not what I was after.
Most of the companies that look for traders are simply casting as wide a net as possible—through job sites and recruiting agencies—for trading ideas/hypotheses. They gather these from traders either directly in interviews or by giving them a bit of money to manage, sometimes hiring them. The ideas are then validated by an expert, tested historically, and if the equity curve looks promising, they scale up the funds allocated to that algorithm. They constantly look for new strategies that slightly outperform the market. It’s not complicated work. At first, I tried to join a firm like that, but after seeing their employees—most of whom seem to earn less than I do at my “regular” job—I thought about starting my own company. That would accelerate my hypothesis testing at least several times over. But I see that besides trading ideas, these companies often also look for investors, and I inevitably ask my favorite question: “If you’re so good at multiplying money—and you’ve already been given money—why do you need more money and more investors? Where’s the previous money and previous investors? Why do you multiply other people’s money instead of your own?” Usually, it turns out that if a company is profitable at all, it only slightly beats the market and loses money in market downturns, so it offers me nothing interesting. If a company or an individual really can trade somewhat successfully, they will do so exclusively with their own money—no investors, no outside capital, no asset management. Outside funds are only sought if the returns are low, the risks are high, or the main revenue is commission-based rather than from trading.
Scammers
The main thing you need to know about making money in the markets is that the primary earnings always come from trading commissions.
You’ve probably heard a few years back about binary options. Maybe you or your friends even lost some money there. Do you know why they were so popular and why all social networks were flooded with success stories?
Because binary options platforms offered anyone who advertised them up to 50% of the money lost by referred clients. Fifty percent of a multi-billion-dollar turnover is huge. This offer attracted every scammer out there. Even small-time crooks still living off their parents’ dime would rent expensive clothes by the hour, head to a local parking lot to find a fancy car, pose next to it for photos, then post about how they “got rich trading binary options,” including their referral link to earn a commission.
I won’t bother writing here why you can’t profit from these options—same goes for casinos, sports betting, and lotteries. I’ll just say what I did about seeing from the inside how gambling apps are developed.
Developing Gambling Applications
I’ve been present at planning meetings in teams that develop gambling apps. The key metric for any commercial app developer, including your broker or bookmaker, is LTV (lifetime value).
General LTV formula:
LTV=ARPU×LifetimeLTV = ARPU \times LifetimeLTV=ARPU×Lifetime
Where:
ARPU (Average Revenue Per User) – average income from a single user over a certain period.
Lifetime – the average duration of a customer’s engagement with the company (in months or years).
In other words, how much money you generate for your broker in a given period (e.g., monthly) times how long you remain a client.
Your broker (or crypto exchange) makes its money from the commission on each trade. In the case of a broker who is also a dealer (as is common in Forex), they profit from the spread as well as from the money you lose on unprofitable positions. The more trades you make, and the larger their volume, the higher the broker’s profit. And if the broker is a dealer, the more you lose, the more they earn—if you suddenly start winning, you can bankrupt the broker. You need to realize that they are financially motivated to teach you to lose money because if their clients begin earning consistently, the broker would go broke (this applies only to brokers acting as dealers).
Classic brokers and exchanges mainly earn through commissions, so they want you to trade as much and as long as possible. That fact explains all their actions: the endless newsletters and trade ideas, recommendations, news—an entire world carefully arranged for your comfortable trading experience. It’s overflowing with lies and manipulation at every level, targeting every segment of their audience:
For wealthy clients, the trick is often in the numbers. An investment bank comes up with a strategy that would have earned +50% in a past bull market, then advertises it everywhere, showing that you could have earned +50%, without mentioning that right before that bull run there was a market crash in which you would have lost money. This is a true story from a real bank—previously considered Russia’s best for investments—that pushes a “serious approach” to portfolio investing, asset diversification, dividend stocks, and so forth. A couple of years ago, when I closed my account at their downtown Saint Petersburg office, I saw a well-dressed man burst in and swear aggressively at the bank’s financial analysts/advisors who had lost his money.
For younger individual investors, UI designers often make the trading terminals resemble snazzy slot machines because no client is more profitable to a broker than someone who, while aspiring to be an “investor,” eventually gets carried away, takes on debt, and loses everything. Or just stares at the screen all their life, paying a commission on each trade—that’s also a great outcome for the broker.
Beginners are often given a virtual account with enough funds to keep “recovering” from losses in the first few months. After all that trading, the newbie sees a profit on their account but doesn’t realize they repeatedly increased trade size each time they had a loss. Without that “double-down” approach, they would be in the red. In reality, it’s impossible to chase losses forever, and once they switch to real money, they lose.
There’s no need to detail all the paid-for trade ideas, analysts, articles, etc. It’s an entire universe that you’re constantly invited into, where you can pick whichever “toy” you like to make life “sweeter”—or so it seems. New ideas and “toys” pop up much faster than you can debunk them, which makes direct debunking a losing battle. Moreover, debunking doesn’t help much because, besides common sense, faith plays a major role—people choose belief over reality.
Marketers carefully figure out how to make advertising more persuasive. For instance, the Forex firm where I lost money 15 years ago used an ad featuring a very insecure-looking man who seemed to hide the fact he was trading. All he did was make some quick taps on his phone, and suddenly he had money, success, recognition. It took me years to realize this was a meticulously prepared actor portraying character traits typical of people prone to gambling addiction. This is exactly how they act and what they want—and that’s what the ad was selling, but labeled as “investing.” I used to like that ad because it reflected my own values. Now, remembering it, I see it as that company’s method of hunting/fishing for naive prey, but back then I saw it as an opportunity for myself.
Tens of thousands of people are employed in this industry, all working to get you to trade more. To them, you are just an LTV or their referral profit. If you blow a couple of million on crypto or stocks and slit your wrists over it, the buyer at some ad agency will earn an extra $200 in commission that day for bringing you in, feel a bit happier, and then analyze the campaign stats to see how they can repeat that success and pour the next campaign even more profitably.
Over time, I arrived at a fundamental truth. There’s only one real truth, and there can be no alternative interpretation:
The Truth
Your broker/exchange/dealer/bookmaker/casino/favorite blogger cares only about their commission. Any (and I’ll consider 99.9% as 100%) interaction they have with you related to your trading is solely driven by their desire to profit off you. They know plenty of fancy words, they know your weaknesses, and they can manipulate or lie, but they have no clue how to profit from the market by trading.
There is no point discussing whatever money-making scheme you’re offered, or how much your friend’s mom’s son made on crypto, or what’s happening in the market right now. If you invest your time in any other activity instead of trading, you’ll likely get some kind of result. But if you invest it in trading, you’ll be sinking deeper into a swamp of misconceptions that only a minority ever escapes. Based on overwhelming data, you’ll definitely (I am 99.9% sure) earn more in the long run by allocating time to pursuits that bring in income or enjoyment and produce something besides CO₂ and waste. If you commit it to trading, you’ll likely lose your time and money—or end up with significantly less profit than if you’d done something else.
Some people who trade may get lucky—they’ll make some money, lose some, then quit.
Some will be less lucky and eventually lose a lot.
And many will remain in that swamp forever, eventually leaving this life or living in a way that’s almost the same as not living at all.
If anyone hints that they’re making money or know how to make money in the market, wait for a long-term market downturn. After that, ask them in person to show the percentage they earned during the uptrend and the percentage they lost during the crash—across all their portfolios and assets. Only the combination of those figures can give you a sense of their competence. Everything else is just manipulative numbers meant to make you hurry through a closing door.
At the start of my journey, I read on forums that brokers run a multi-year funnel to convert every new client. I believed I was different and would succeed. But I didn’t, and now I see that everything I saw and still see is a series of endless tricks and illusions showing fictitious returns and possibilities that fed into my fantasies. Now I recognize it simply as a predatory process, the same as how insects or animals use cunning to hunt in the wild. I ended up being the inattentive fish, not the shark.
You’ll see them pretending to hold a door open for you—an invitation to a world of opportunities—and instinctively you’ll rush in, entering a “can’t lose” quest meticulously designed for your “success.” In this quest, every event and actor will convincingly tell you that the end is near, that success is close at hand, encouraging and supporting you, showing you contrived examples of “winners.” You can leave this quest at any moment—nobody locks you in—but they’ll keep enticing you back. If you spend enough time there, you’ll notice you’re in a “butchering room” where you gradually lose piece after piece of yourself. The quest’s actors will reassure you that everything is fine and working as intended. If you believe it and stay too long, there might be nothing left of you to leave with. Periodically, you may snap out of it and exit, telling yourself never to go back, but after a while, you’ll find yourself forgetting how bad it was and facing the decision of whether to re-enter. If you keep going back, you’ll get confused about what’s real—you see you have less and less left, and life outside the quest grows worse. But will you pick that bleak reality you’ve almost lost, or continue with the illusions of a future you can’t let go of? Will you take responsibility for the one real reality you abandoned long ago and start working on it earnestly? Even a small effort in the real world produces tangible results, whereas titanic efforts in the quest yield near-zero or negative returns. What will you choose: real outcomes, no matter how small they seem initially, or your faith and fantasies about a future that keeps shifting and never arrives? Do you have the courage to look at the data, admit you have no progress, and acknowledge that your plans are just fantasies with no path forward? Do you have the strength to recognize you will never achieve the result you once dreamed of? Do you have enough resolve to open your eyes and begin taking real actions that quickly yield real benefits, instead of illusions of progress toward some imagined goal?
I’ve written all this to bring closure to my years of searching and to reread if my remission ends. I also want to tell everyone who never started trading or who quit and worries they missed opportunities:
There are no real opportunities there. You did the right thing. You haven’t missed out on anything—unlike those who chased these “opportunities.”
There’s no point in regretting “missed” opportunities. Instead, focus on self-improvement so that when real opportunities come along, you can seize them, rather than being lured by a red-carpet path leading to another “butchering room.”
