Found a New Stock Trading Course Online? Demand Some Proof
Published on August 7th, 2023
In today’s information world, it seems that everyone is out for quick riches. This has led to a plethora of get-rich-quick course sellers who are hawking everything from Amazon drop-shipping, penny stock trading courses, Forex trading courses, options day trading courses to binary option scams. If you play around on Instagram, you know exactly what I am talking about as these ads pound your device non-stop. Everyone has a system, and ‘how to learn trading easily’ is the message.
Do you ever ask yourself, if their idea is so good, why are they sharing it with you? Why wouldn’t they just continue to exploit this great idea instead of creating competitors and lowering their own profits? The answer, you hopefully realize, is that for the most part, they are selling you snake oil.
Now, of course, there will be a handful of people who do know what they are talking about and can provide valuable information, but because so many people have gotten rich selling you on “how to get rich,” there is so much repackaged generic information out there that isn’t worth the electricity it transferred to your computer on.
Everyone by now seems to have read “The Four Hour Workweek.” This was one of the author’s get-rich-easy ideas and he basically he advised to do a little research on a subject, and then just repackage it into a course and sell it online. Real experts with real useful information are drowned out by such weak efforts.
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Where’s The Proof of The Instructor’s Success In The Activity?
Before purchasing any of these courses, I would strongly suggest getting some kind of proof of their success. And I’m not talking about the picture of the rented Lambo in the driveway, I mean third party documentation of actual sales reports, trades or at the very least, a multiple year return chart.
In the investment biz, we don’t allocate money to a manager because he owns a Bugatti, so why should you?
I’ve seen one successful trader post brokerage statements and certified IRS tax filings on his website and he was only selling a $30 book. That’s very solid, but understandably, most people wouldn’t be willing to go that far because it’s a lot of personal info.
On the other hand, there’s a well known penny stock course promoter, Timothy Sykes, who promotes his “Lambo and trade anywhere” lifestyle and has managed to get himself onto talk shows talking about how successful he has been trading penny stocks. But when he started his own legitimate hedge fund 20 years ago, it failed after 3 years. You won’t see that on the front page of his website.
I read one of his books and, of course, he downplays the failure and attributes it to a single bad investment, but we can’t exclude the investment choices that performed badly and pretend they don’t count, can we? If you make it to the bottom of his website there are a bunch of legal disclosures that show 97% of traders lose money because he risks a lawsuit if he doesn’t disclose the snake oil he is selling isn’t great advice.
This point might be obvious, but physical possessions are not proof of success in the activity they are trying to sell to you! This style of marketing must work because so many promoters use it, but the items could be rentals, they might have come from a large inheritance, or more than likely the money came from selling the “Learn to X” courses. Hell, I’ve seen Instagram ads that comically look like they just found an exotic car in a parking lot and started filming their pitch next to it as if it is theirs.
This style of marketing is only trying to cater to your FOMO greed.
A consistently profitable track record is a key indicator of competence and this data offers valuable insights into the instructor’s trading strategies, risk management practices, and overall market expertise, ensuring that students learn from a qualified source.
But note, this does not mean that the instructor will be able to teach you how to do it even if they can, but at least it’s a start.
Assessing Risk Management Strategies
Effective risk management is a critical component of successful trading and investing. Examining brokerage statements or return charts allows potential students to assess how well the instructor manages risk in their trades. Did the guy just lever up the account and get lucky? Everyone is a genius is a bull market.
It’s more important to know if his style of trading blow out the account during the first bear market. Making $10 million and then losing it all the next year isn’t great success.
I know a man who has accumulated millions of dollars from trading, and brags about it all the time and shows everyone his trading app and holdings. He only plays the FAANGS and one of his large portfolio holdings is TQQQ, a triple levered Nasdaq 100 fund:
He loves to brag about how much money he has made from that, but is he just lucky? Things weren’t so rosy in 2022 because the market ::gasp:: went down that year. He admitted he lost over $4 million that year and started cutting costs and trading down on some possessions.
And that was a pretty easy going bear market that only calmly declined for 9 months! Imagine if he was steamrolled with the internet bubble collapse of 2000-2003.
A reputable trader with a course on day trading will emphasize the importance of risk management and exhibit consistent practices that protect capital while seeking profit opportunities. Understanding how the trader handles risk can help students gauge the level of responsibility and prudence they will learn throughout the course and proof statements will help show if the trader’s only skill is good luck.
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Evaluating Consistency and Longevity
It seemed like everyone became a successful ‘trader’ at the start of the bull market that began Nov 2020. Only when the market turns to bear can you really evaluate a trader’s through-the-cycle performance.
As such, brokerage statements or detailed return charts provide a historical perspective on the instructor’s trading journey. A trader’s long-term consistency in profitability is far more valuable than isolated instances of success.
If they bought a single stock that did 10x in 6 months and made them a millionaire, while impressive, that speaks more to luck than success. I’ve come across hundreds of these types of traders on FinTwit that gain thousands of followers because they bought one of the meme stocks or cryptos that made them a million dollars. That won’t help you much.
I’d rather be lucky than goodLefty Gomez
With statements spanning several months or even years, potential students can evaluate the instructor’s ability to adapt to changing market conditions, navigate challenges, and maintain consistent profitability over time. Longevity and consistency are indicators of a trading methodology that is sustainable and robust.
Encouraging Accountability and Transparency
Requesting statements sends a clear message that students value accountability and transparency. This would foster a healthier and more responsible responsible trading education ecosystem if more people insisted upon this.
Another question is how much money is on the line? I once came across a course where the promoter was selling trades for $100 a month to hundreds of students but was only trading $10,000 of his own capital in his system. He claimed that he didn’t want to exploit the profits away from his students, but more than likely he didn’t believe in his own system that much.
Understanding Trading Style Compatibility
Every trader has a unique trading style that aligns with their risk tolerance, time availability, and financial goals. Reviewing statements allows potential students to determine whether the instructor’s trading style complements their own objectives. Is there multiple trades being made daily, or is the instructor more of a swing trader and places bets monthly?
If an individual has a demanding full time job, a course led by a day trader may not be the best fit. And if you can’t stand to lose money when a stock goes down and refuse to use stops, the trader’s results will also likely not match your experience and maybe sticking to the S&P 500 is more your style.
The ability to identify trading styles that align with personal preferences ensures a more productive learning experience.
Do You You Need a Course At All?
There are literally thousands of books and hundreds of free videos on Youtube that you can use experiment with ideas. I’ve read dozens of finance and trading books, and rarely does a fresh, original idea pop off the pages.
If you want to learn to trade stocks or options, it should start with the self-education and not a course promoter.
A trading course could end up being informative, but it’s probably the same information you could get online for free or from a $30 book instead of paying hundreds of dollars for it.
The next question is how long does it take to learn to trade? There is really no real answer to that but the trading course promoters will likely imply that you could be trading successfully by next week.
More than likely you will find your first year’s live trading performance to be dismal until you tweak your process enough. Always start with a paper trading account to get a feel for it.
What Should You Look For? Here’s My Performance Chart
I don’t sell any courses, and this website is the only place that I share my investing thoughts (not financial advice) for free. The fact that I own an Aston Martin should not be sufficient proof for you that I am a good investor or trader.
The return chart below of my main investing account is the kind of thing that you should look for, consistency of growth whether the market goes up or down. I don’t always catch the big waves up, but I tend to lose less money when the market declines, which generally leads to outperformance over time. In 2022, I actually continued to make money and with less volatility than the S&P 500.
Over the last three years, my main account has grown over 85% compared to the S&P’s growth of just under 50%. The US Bond Aggregate lost money over the same period.
Let me know if you are interested in my process and I will write a followup article. Several of the articles on my website showcase some of my thoughts at the time, but I don’t have time to write about everything.
Ultimately if you do decide to purchase a trading course, I can only recommend that you get some kind of third party proof.
By doing so, potential students can verify the instructor’s track record, distinguish real from hypothetical performance, evaluate risk management strategies, assess consistency and longevity, avoid scams, and ensure compatibility with their preferred trading style. Holding trading course sellers accountable for their claims through verifiable evidence promotes transparency and raises the overall quality of trading education. Ultimately, a well-informed decision will equip aspiring traders with the necessary knowledge and skills to navigate the markets confidently and responsibly.
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