I put these trading instructors to the test with my own money. Here's what I discovered.

Real trading is HARD, unlike what the YouTube advertisements would have you believe. Trading income will never, ever trump investing in a long-term portfolio of diversified assets for the vast majority of people.

Even worse, there are many sketchy characters in the trading education field. Knowing who to run toward and who to trust might be challenging.

I have tested a variety of coaches and programs with hundreds of dollars of my own money, and I have seen the good, the terrible, and the ugly.

Education: Is it worthwhile？

Years of learning can be sped up with the right tutor. It certainly did for me.

Wouldn't you start by reading all of the top books available on the market if you wanted to master chess？ Trading is the same.

So how can we distinguish between genuine mentors and con artists？

Here are some pointers:

However, aren't all trading instructors frauds？

I frequently hear one of the following statements:

They wouldn't need to instruct if they could actually trade.

or

Whoever can, does; who cannot, teaches.

The fact, however, is more complicated.

A competent trader may desire to mentor others for a variety of reasons, in addition to the simple delight of educating others:

First off, even if you are an excellent trader, running a trading education service can earn you just as much money (or more) if you don't have a large bankroll.

Let's calculate:

Let's assume you perform at Jim Simons' level (unlikely) and achieve a stunning 70% annual return.

Even with a $50,000 bankroll, that's still only $35,000 a year. Not terrible if it lasts and you can compound it, but for virtually everyone, that level of performance is highly impractical. The truth about trading is that you need a lot of capital to succeed.

According to an excellent article by Lone Stock Trader on how to earn a living trading, you need have roughly 260K in the bank if your desired annual income is $30,000.

In contrast, I am aware of trade educators who generate six figures per month through the sale of their courses and memberships.

Additionally, every successful trader experiences periods of drawdown, including losing days, months, and even years. We can't assume that simply because someone teaches, they can't trade because a second source of income helps smooth out the equity curve and lessen the constant tension that comes with trading.

So how can we identify the best mentors？

Take care of yourself first.

The truth is that nothing is ever certain. Therefore, it makes sense to implement sound risk management. Here are some things to think about:

1: Don't ever send someone money to trade with you.

It should go without saying, but I have heard of instances when clients have sent traders money in exchange for the promised exchanges. Typically, they never see that money again. Just refrain.

2: Start out by trading on paper.

It can be tempting to begin trading with actual money as soon as you discover a new technique or system.

It's essential to put your new knowledge to the test. Utilize the paper trading option offered by your broker and only scale up once you are certain that everything is going according to plan.

When you spend money on something, your mind will go into overdrive to try to persuade you that it was worthwhile. This could cause you to place too much trust in a flawed system.

3. Be wary of extremely pricey trading courses.

The majority of trading courses cost between $100 and $1,000, although I have seen people sell $10,000 or even $20,000 courses. There is absolutely no justification for this expenditure! Implement what you learn by beginning small. In a few trades, a quality course ought to cover its costs.

Following these three recommendations will prevent you from blowing your entire bank account due to cognitive dissonance and will instead restrict your loss to the amount you spent on the course.

What to look for in an educator in trading:

These indicate success:

They realistically set expectations.

Jim Simons Renaissance Tech, one of the top hedge funds in the world, averaged 70% annually. However, they have an endless supply of Ph.D. mathematicians working around the clock and processing power that is almost limitless. Do you honestly believe you can defeat them？

You should at the absolute least be extremely suspicious if your tutor makes outlandish claims or implies that you can make a full-time living only from trading.

2: They talk about risk management and trade.

When two traders use the same trading approach, one makes money and the other loses money.

The distinction？ Size of a position.

Even a successful technique will put you in the poorhouse if you bet too much.

Only a small portion of the issue is knowing what and when to buy. A comprehensive trading strategy should cover a variety of topics, including how to handle trades, diversify, size positions, and more. You won't grasp the whole picture and are more likely to fail in the long term if you don't learn this from your mentor.

3. They offer more than just “trade signals”

Getting alerts on your phone to purchase and sell when signals arrive sounds nice, but I have never heard of anyone who has actually been successful doing this.

If you don't purchase or sell at the same moment you receive the signal, you could not obtain the outcomes that you want, even if the signals are good (narrator: they rarely are).

Even worse, a lot of signal services place more calls than you can handle and then flaunt the “positive” calls as proof of their accomplishment. Even though the signals are largely random, it gives you the impression that you are at fault. See the trend here？ The signal provider takes use of cognitive dissonance to make you believe that you are the issue.

Finally, signals don't truly teach you anything because they completely depend on someone else for your success.

Here, the old saying “teach a man to fish” applies.