Jun 29 2009
I Have a Trading Education Dream
For some time now I’ve been trying to figure out how best to help as large a group of people as possible to develop their analytic and trading skills. I’ve certainly done quite a bit of blogging and writing and speaking and presenting in an effort to do so, but it’s not quite what I’m after. That’s more instructive than collaborative.
Don’t get me wrong. Instruction is a necessary part of the education process. I’ll continue to provide that sort of uni-directional work, but what I really have wanted to do for some time now is to create an environment whereby people and look over my shoulder, so to speak, as I do market analysis and come up with trading ideas, where I can do the same thing in return, and where people can do it for each other. This is something I know from feedback that folks are very interested in seeing.
I’m getting close to having things set up. I think it should be ready to go into full action in September.
This new program will basically be a focal point of all my trading education efforts moving forward. I’m expecting it to include things like:
- Specific market analysis leading to trading ideas
- Videos and other materials explaining the techniques and methods I use
- Podcasts and write-ups discussing market developments
- Trading education videos, audio, etc.
- Interviews on an array of subjects
- Additional videos and other materials to provide further perspective
One of the things that I’ve struggled with for some time is how to encourage participation. This has been a consistent problem when I’ve tried to do interactive programs in the past. While I realize it will never be the case where everyone is going to become an active participant – which is fine – more is definitely better for the cummulative educational effort.
Furthermore, I figured out many years ago that teaching is a fantastic way to learn. Anyone who’s ever coached or taught anything with any kind of intent will almost certainly agree with me on that. That’s a big part of why I want to encourage interaction.
So my thought to encourage the interaction is to create a monetary incentive for doing so. It would be something whereby the top X number of contributors on a monthly basis are paid rewarded for their efforts. This basically sets up a situation where those who are strictly there to take advantage of the available information and materials pay to do so, while those who give of their time and effort to help out their fellow traders are recognized for doing so.
I’m not totally locked in on how those top contributors will be determined, but I envision it being some combination of voting and editorial review. Any suggestions or thoughts on that subject would be appreciated.
Actually, any thoughts or ideas you have, things you’ve liked in other sites or would like to see, are very welcome. Just leave them via comment below.
Here are some other posts which might interest you:
- FAQ for New Traders in the Works
- Value, Quality, and Integrity are the Key
- Rupert Murdoch and Charging for What is Currently Free Online
- I hate earnings season!
- Getting Back into the Swing of Things
It’s an interesting idea and a noble challenge.
There is an argument that those who have something useful to contribute will probably not be motivated by the money unless it is significant.
I also suspect that many would be unwilling to pay for such information given the amount of free (although not always useful) information via forums, twitter, stocktwits, blogs etc etc.
However, I do see there being value/interest in a community where traders can exchange ideas and collaborate so I think you’re on to something. I also agree with your points on teaching, but my gut feel is that this would work better with less rather than more.
Probably not the feedback you wanted but my first thoughts on the subject. I wish you all the best.
Hi John,
Basically I agree with Al: it’s a worthwhile endeavor, but it’s going to be hard to get experienced traders to cooperate for a little money and to get a significant number of people to pay for some – any – online educational trading service.
Nevertheless, I’d be happy to participate sharing whatever knowledge and experience I may have of value for free and see how it goes from there, maybe this ends up working the way you envision it, not working at all or maybe it turns into something better that you had planned!
Best trading,
Jorge
I think it’s a great idea – for learners if there’s a visible track-record of success that encourages them to subscribe for modest $’s; for contributors, I would think it would be more about peer-recognition and appreciation than big $’s as rewards.
Deep down here in the Antipodes, I’ve heard of a similar concept at a site called SpikeTrade. I’ve looked at its home page and it seems to have some similarity. You may well know of them – Alexander Elder is involved by the look of it.
John,
Let me congratulate you on taking on this noble challenge.
However, I believe many people see trading as a “get-rick-quick” scheme rather an a long-term career. Hence, many have a hard time putting in multi-year effort to become traders. Only less than 5% of this group will have profitable trading careers; same with less than 2% of school athletes becoming professionals, or even less than 1% of all corporate employees becoming corporate CEOs. It’s a “survival of the fittest” approach.
For argument’s sake, once an amateur accepts these facts, then the real work begins. In my case, I went into a 5-year “trading” journey after college, and here as some lessons learned.
1) Name of the Game: It’s not the frequency of correctness that matters, only the magnitude of correctness. As Van Tharp aptly said, “making money and being right are not one and the same”. Also, have realistic expectations.
2) Focus on simple, tried-and-true strategies. In other words, don’t go for the over-specialized systems that get wiped out after the market’s landscape changes. Instead, focus on a system that remains profitable despite the landscape changes. In my case, I spend 3-years testing systems that “broke down” as the landscape changed (back-testing in different decades, or 5-year periods).
3) Develop Market Stamuina: Start with small capital, mainly to prove you can breakeven after 6-month time. Keep trades to the smallest lot allowed. It’s like being hand-cuffed to minimal profits, but this will build stamina. In my case, I spent 12-month period in simulation to build stamina. Remember, consistent repetition builds skill–not necessarily more indicators that increase “accuracy”. Studies have shown that more than 3 indicators, accuracy actually get worse!
4) Judge success on quality of decision-making process rather than outcome. Wall Street is a probabilities game. Gambling does not reward patience, but speculation certainly does. Hence, it’s CRUCIAL to distinguish results between “deserved success” and “dumb luck”. Positive outcome with great decision-making = “Deserved Success”. Negative outcome with great decision-making = “Bad Break”. Positive outcome with HORRIBLE decision-making = “Dumb Luck”. Negative outcome with HORRIBLE decision-making = “Separating a Sucker from his money — Poetic Justice”
5) Less than 9% of your winners will be big enough to pay for all of the year’s losses, and still give respectable annual returns. The key challenge is to still have money available to battle through the 95% mediocre trades. Don’t invest too much emotion here, as emotional persistence is critical.
6) Understand how your brain processes information. The brain is designed to interpret all input from the 5 senses as “new information”. For traders, this means that the mind’s performance is influences by emotions, sound, sight, and this affects the bottom line. Naturally, the mind does not process price bars with a “decision tree” approach that evaluates probabilities and expected payoffs at every decision. It’s not designed for this! Wall Street requires this “probabilities” approach from successful traders. The big “trap” is that these probabilites are not 100% certain, only estimations. They change on any whim of the masses, unpredictably.
7) The business of investing is not the same as the business of “managing money”. Today, money managers have over 100% turnover on their positions because their aim is to duplicate the performance of the indexes. 50 years ago, the average turnover as more around 20%. Back then, the focus was to find “value companies” as stick with them through thick and thin–focusing the lion’s share of capital on excellent companies, the business of investing. Today, the business is focused more towards “managing money”, having as many clients as possible to increase “Assets Under Management” because they earn more money on fees and comissions.
Well, those are my lessons so far… if you want to become a smart trader, learn them and save yourself at least 5-years’ time.
The idea for a “Look over your shoulder” and vise versa approach to teaching how to trade would be quite a challenge and time consuming endeavour. Here is what I found out about other sites approach.
The majority of Online sites teaching trading offer invitations to live trading with their approach and methods, but they do not give any valuable feedback on the participants inputs to that approach.The reasons for that is quite odvious, most participants are new to trading and they are confused as hell about the markets and price action.So when an experienced trader like me joins the free trial, he quickly becomes dissillusioned and inpatient because there is no advance trading ideas offered and the methods seems to be a copy of everyone else, or a variation of other Live trading sites.
There was one site that came very close to perfecting this teaching approach using the Elliot Wave Method Theory, but the owner died and all the participants disapeared into the Web Universe.
This guy was good at membership rettention and keeping you interested in his method, he had a section of his site devoted to others members charts and interpretation of the EWT. Another section was dedicated to teaching Elliot Wave.Another section was a forum were members exchanged trading ideas and then there was the Premiun section were he would explain in detail the next move of the Markets and his Projections of Price Action and then he would give the results for past analysis with a detail explanation of why it came close or failed, or exceeded the expectations.And there was a section devoted to the Psychological aspect of trading.His free trial was only two weeks, but there was no access to the Premiun Paid Section of the Site.
My suggestion to you is to have a site that separates Scalping from Swing Trading and to encourage members to post their charts with detail explanations of the traidng plan and approach to Entry and Exits.
Quite a challenge, I suppose, but worthwhile.
Best Regards,
Lance
Fisher Island,FL.
Al – All feedback is good feedback, so I definitely consider your comments valuable. The one comment I would make is that there is a differentiation between “information”, which you rightly say is readily available all over the place, and what I have in mind. I’m not looking to compete with forum sites. What I’m going to focus on is my particular areas of expertise, not general education. That, I think, will make for more valuable content and a more useful user experience.
Jorge – Nothing ventured, nothing gained, eh?
To your point about getting experienced traders participating, it’s actually not my intention to enlist them per se, but rather to develop them. The focus I have in mind is to concentrate on the methods I personally use. As folks learn and become comfortable with them they can then help out others. This is not to say that folks with different approaches will not be welcome, of course. It’s just that I won’t be actively recruiting them if you take my meaning. I realize this means a lot of work on my part being the main answerer of questions and provider of advice, but that’s ok. If it develops into a community of like-minded folks who learn and help each other develop over time then the initial effort will be well worth it.
Peter – SpikeTrade actually does look like it could be running along a similar line as what I have in mind. Thanks for pointing that out.
Federico – I mostly agree with what you’ve posted. My two points of disagreement are with #s 1 and 5. While frequency isn’t the only decider of success, neither is the size of winners over losers. It’s both together that determines performance. You can have winners come in at 10x the losers, but if you’re losing 95% of the time you’re not going to be profitable. As for the small number of winners defining success, that is only true of strategies (mainly trend trading approaches) which feature big, relatively infrequent winners. Other strategies have gains that are much more evenly sized by nature. Doesn’t make either better, though.
Lance – Thanks for the input. Scalping won’t be part of what I focus on as it’s not my thing, but that won’t mean members can’t talk about that sort of trading amongst themselves. I do like the member posting of charts/ideas, and that’s part of what I have in mind in terms of my looking over their shoulder. As you’ve noted, it does mean some work on my part, but if it works out I’ll develop some helpers to spread the workload.
I agree with the fact that a teaching environment is a good learning situation. Some people I helped starting up are now taking up speed and that’s a very valuable reward for me.
The main problem I find always is over-information. Too many information streams of unknown quality. Too much haste to get rich (see Federico’s comment).
My thoughts are around how to inform a group of people, all different level, in a way that’s valuable for all, or … is there a need for separation in levels?
Could there be a way to “include” in the sessions a kind of “secretary” which hands out notes or does a resume ( or a weekly talk … you name it) so people can recap and go to the point
Thanks for trying to create and … I’d happily lend you a hand
Marc – I agree with you 100%. It’s a discussion I’ve been involved in many times. Yes, there’s loads of free information out there, but that doesn’t mean it’s the best way to go. It’s a question of value. I would argue that spending a bit of money to get the info I need from a source I feel I can rely on in a format that optimizes its usefulness to me is a much better way to go than to spend untold hours searching for free info which is scattershot and of dubious reliability. Information overload is a definite problem, which is why I want to keep things focused in specific areas related to the trading methods and techniques that I use. As soon as you start spreading out from your base of expertise you start degrading the value of what you’re providing people.
I disagree with the concept of cash incentives. You will never be able to pay enough to interest anyone who is qualified and is not already interested in contributing for other reasons, so save your money.
I think that the (only) reason people will contribute continuously is because they want to do so, for a variety of personal reasons. So do something that will provide those other reasons. It will have to be a range of benefits, to appeal to a range of personal motives.
Take yourself for example. Are you in it for the money? If so, I suggest you focus on trading instead. If not, then why would a small extra award motivate others?
In fact, just like “awards” in most industrial settings, the cash is actually de-motivating, because it is always awarded to some undeserving fool friend of the boss.
In psychological terms, what you want are intrinsic motivators that last for an extended period, rather than extrinsic motivators (like cash) that quickly lose their value and appeal. Check out the psychological literature about how motivation works, and I think you will probably agree.
Don’t get me wrong. I am very positive on what you would like to accomplish. I just predict that cash can not make a difference unless you make it a full time job, and maybe not even then.
If you (or a friend) has a funded ThinkOrSwim account, request entry permission from TOS customer support, and then check out the David Elliott chat room there. It is similar to a basic version of what you want to do, as I understand your wishes; and it works. However, it does not work without some internal tensions that you might notice (I would hope) after being around for a while there. BTW, David has been doing this with success for years now; first with Worden Brothers, and now with TOS.
Larry – Your point is well taken, and I agree that in most cases contribution is something one does for non-external rewards. My thought is only to add something on to that which may incentivize a bit more participation than would otherwise have been the case. I’m certainly open to alternative ideas and will continue to give the whole matter a lot of thought.
On the subject of the chat room, at this stage that looks like an unlikely part of the mix for the simple reason that I do have a full-time job and I’m thinking my employer wouldn’t be too keen on my spending time not focused on my work – oh, and there could be SEC restrictions as well as I work for a Registered Investment Advisor. Even if permission were granted my ability to contribute to the discussion could be spotty because of my work duties. I don’t want to make that kind of commitment and not be able to stick with it. Outside work, of course, is a whole other story.
I agree John, “Nothing ventured, Nothing gained”
That said I am in. I would love to be part of teaching/mentoring traders….I know it makes you a better trader in the process. I trade futures…and a few ETF’s. I also have quite a few ideas on how you should structure it and a line on some other very qualified traders who may be willing to contribute. I think you “interview” and pick a few traders from each background (stocks, ETF’s, Forex, Options, Futures) to be the “head/leader” of that topic and just give them free access for their service. As I said I have many ideas on this subject, as I was going to start a similar site but just didn’t have the time or, to be honest, the resources. If you are interested in anything I have said e-mail me back and we should talk.
Hope to hear from you.
Jeremy
It would be nice to learn about all those “other markets”. However for beginners Forex is quite a big subject. It would be nice to expand horizons but, sincerely I think this could be a further expansion.
If the idea behind the site is helping each other, progress together and try to make people reach profitability then I think there are a lot of people who may take some time and effort.
I have seen, however lots of traders starting in good intention a website to help others ( sure you know some too ) and falling afterwards in the trap of commercialism.
That said I agree with Jeremy. Teaching is a grateful experience. And for sure that some “innocent” questions get you on the road to be a better trader yourself.
So, let’s consider that helping people is in fact helping yourself. That said could we get this off the ground, without for the moment thinking about the money. The cost to run a webiste nowadays is quite low, and for the case there are always some ways to cover the costs.
So first let’s “pay forward” then things will fall slowly in place. Yes, I am avocating a site where people meet, where things aren’t structured around a commercial idea and where it is possible to learn. There will always be people “just looking” but then after a while they will go back to all their chats and forums.
Maybe I am thinking too much about personal satisfaction.
Needless to say …. Count me in….
Marc – Since the things I mainly trade are individual stocks/options on a swing/position basis, S&P futures on a day-trade basis, and forex in multiple timeframes those markets and the strategies I employ are the focal points I have in mind – plus related and supporting things, of course. It will be easy for members to concentrate on only what they have an interest in without having to wade through unrelated subjects. This isn’t to say that other strategies and markets are out of the question, it’s just that others would have to lead those discussions if that’s the way things are to play out.
On the subject of commercialization, this will definitely be a for-pay membership program, but to your “pay it forward” point I’ve got some plans for putting the revenues to use in socially beneficial ways. I’m not strongly motivated by money, so the “trap of commercialism” isn’t something to worry about. A price tag is necessary because people tend to take things they pay for more seriously than what they get for free, but providing value beyond that cost is important to me.