Friday, September 19, 2008

Pursuing a Trading Education

As many readers are probably aware, I am a great believer in advancing my trading knowledge and advocate ongoing trading education for anyone who wants to become and remain a successful trader. During the last week, I had a short dialog with a subscriber on the blog who adamantly takes the position that he is going to learn for himself. Good for him! That is what I did and that is what most traders must do. However, the subscriber further explained he wants nothing to do with books, seminars, coaching, DVDs, or services that are sold. I am not sure what that means except that he is going to the school of REALLY hard knocks. I have no idea how much money this person has to risk, but with an attitude that he can do it without assistance from those who have gone before, my bet is he won't have it long. It's a little like deciding to be a doctor, but not be willing to put out the cash and effort to attend medical school -- potentially hard on the patient -- and in this case, the subscriber is his own patient.

I remember when I first became interested in trading. I at least bought a book and that piqued my interest which led me to attend a free "come-on" seminar where I knew I would be solicited to pay for a more comprehensive seminar. I went to the free seminar fully determined not to pay for the seminar being sold. Thankfully, I re-thought my decision and did pay for a two and a half day seminar. I made back the cost of that seminar within a week using information I had gained at the seminar and from that time forward never hesitated to pay for my education. It was far less costly than trying to get everything for free. Though I speak at events on occasion (usually without pay) I no longer give seminars so I am trying to sell nothing when I say that the many I attended have helped me succeed as a trader. Without them, I might possibly have been out of the trading business years ago.

In my own case, I read every trading book I could get my hands on, watched umpteen VHS and DVDs, and still attend seminars with some regularity. I read several trading books a year. In short, I make sure I devote substantial time each year to enhancing my knowledge. I know several would-be traders who, like the subscriber, absolutely refuse to pay for any educational information regarding trading. Not a single one of them has been successful and most lose their trading money within the first six months. Education only makes good sense and why shouldn't the educator be paid? Should you buy a stock, for example, if you don't know how you might limit or remove risk? Would it be helpful to know a strategy that will make you money if the market or the stock moves in either direction, just so long as it moves? Though not currently the case, would it be helpful to know strategies that provide a nice return in a flat market? How likely is someone to stumble upon these things as a new trader unwilling to read a book, go to a class or watch a DVD?

I realize I'm probably preaching to the choir here, but when I see folks like the subscriber who evidently resents authors or lecturers and begrudges them payment for passing on their knowledge, I feel a need to reiterate that successful trading requires work and study, it does not come from bull sessions with other unsuccessful traders. Serious trading, in my view, requires a foundation of knowledge first and then the acquisition of experience. Trading real money before obtaining the basic knowledge seems like a perfect recipe for failure.

by Bill Kraft, Editor
Copyright 2008, Makin' Hay, Inc.
All Rights Reserved


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27 comments:

Anonymous said...

Bill,
I had to reply to your aritcle regarding the subscriber who insists on teaching himself the keys to successful investing.

I submit to you that every problem, challenge, and obstacle you will ever encounter has already been experienced by someone else before you.

Whether it is problems with marriage, children, finances, job loss, addictions, death of a loved one, whatever...someone has already been through that situation and solved the problem.

How FOOLISH are we to ignore their wisdom and insist on re-learning the same lessons ourselves. How much further along in life could you be if you could have avoided your biggest mistakes by learning from the people who have already made them.

Proverbs says "Though is cost you all you have, get wisdom...it is better than gold...more precious than rubies."

If this subscriber thinks the cost of education is high, he should consider the cost of ignorance.

Thank you for sharing your wisdom.

Paul R.
Oklahoma City

John said...

Bill;

I firmly agree with your stance on education. Two reasons; one the investing world is a moving target, and no one is born with the intrinsic knowledge to deal with trading. The investing world today has changed dramatically in the last several years and it is not possible to figure it all out by ones self. Also it would take years to test and analyze all the possible trading strategies and therefor someone else will always figure out something you may not either ever or for some time.

An additional question for Bill is does he see benefit in training from Investools. I have seen ads for the training at a number of investment seminars such as MoneyShow and wanted to know if you had any first hand or qualified opinions on it.

Even with your good track record thanks for being humble enough to admit no one know it all. Keep it up and let us know if you encounter education vehicles you deem to have advanced yourself or some one you trust.

Thanks, John, Los Angeles

SeriousInvesting said...

The following quote comes to mind “A smart person learns from their mistakes, a wise person learns from the mistakes of others.”

I have learned that being “market wise” is much more profitable that trying to be a “smart…”

By the way, great activity in the markets this last few weeks – what a wonderful rollercoaster ride! I can’t wait for next week.

Christopher Cerda
Author “Serious Money Investing”

Anonymous said...

I think I lost my post. The gist of it was that what your subscriber's reluctance to pay for classes etc brings up for me is the difficulty in recognizing a bona fide source as opposed to a scam. None of us, or few anyway, have resources we can have ripped off. So, I would join John in asking if you could recommend a source of education that is reputable. Nice article---thank you for addressing this the respectful way you did and for your candor

nofoolinpoulin said...

There's "Wisdom" in them thar words Bill! Keep preachin to the choir!
"Experience" is what you get when you don't get what you want!
A "Conclusion" is a place you get to when you stop thinking!
author unknown (plagiarized) :) DP

Anonymous said...

Hello Bill,
I don't often go to teachings because so few of them are worth anything. A few years ago, for example I went ot one in Chicago taught by the revered Jake Bernstein. He is a very bright fellow, but the ideas he imparted really were not worth much, in my view. Recently I bought " The Trading Method that will make You Rich " for $165 by Roy Kelly. It may make him rich but, I swear it will not add one buck to my pcoket. ( the book was well-reviewed ). Your own book is well worth about 10x the Kelly book so - maybe you should change the title and charge $895 for it. People often think they get more when they pay more. I do continue to study, and trade the market - bit there really is very little that is worth knowing that is not already out there, as I see it. However, there are always new sheep coming into the pasture so they want to learn too.

Anonymous said...

It sounds like this guy doesn't have all his buttons,to think he will learn this by himself. What does he do when he puts on a trade close his eyes and put his finger on a stock, and say we'll buy a call or put and see what happens. I don't no of anyone who learns from not reading or viewing material. I recently bought your book Trade Your Way To Wealth which is very informative.

To John from L A, I'm an investools student, yes its a good program, there are three different programs to choose from, one is Investing Foundation and Basic Options, the investing foundations course is on buying stock this will cost you $6000.00 and it's good for a year, the Masters course which includes the investing foundation, basic options and technical analysis this will cost you $12000.00 and it's good for 18 months, then there is the PHD course it has everything the masters course has, and advanced option strategies this will cost you $24000.00 it's for 2 years and if you want you can renew any of them, but I don't know what it cost to renew, and you have whats called virtual coaching that you can go to Mon -Fri from 9:00 am to 11:00 pm where student go in and talk about what trades they want to make, where you want to get in, where you want your exits to be tell them your plan, and the coaches look at it and go through them and basically disect it and tell you if it would be a good trade or not. You also have the online courses to take, and any questions you have you can either call them up or chat live, and they will stay on the phone as long as you want to talk to them. Yes it's a lot of money, but so is going to college to be a doctor or a lawyer

Bill Kraft, MarketFN.com said...

Thanks, Paul R., I couldn't agree more. The cost of ignorance is, indeed, prohibitive.
Bill Kraft

Bill Kraft, MarketFN.com said...

Thanks for writing, John. I really don't know anything about Investools though I have been aware of their existence for quite some time. If they give a free introductory seminar it is probably worth seeing what they offer. Even if you don't like it it is worth putting up with the sales pitches just to see whether it appeals to you and whether you want to sign up for the paid offerings. Some entities sell software or programs designed specifically as trading tools while others teach strategies and approaches. I personally prefer those that teach trading over those selling some supposedly foolproof system. No system can be perfect in the trading world, and the knowledge to trade one's own plan is much more important to me.
Bill Kraft

Bill Kraft, MarketFN.com said...

Thanks, Christopher.
Bill Kraft

Bill Kraft, MarketFN.com said...

Thanks, Anonymous. You can see my response to John. So much depends on what you are looking for in your own trading education. As I said to John, I look for educational material that teaches me trading strategies and approaches, not software claimed to do the trading for me. Authors like Dr. Alexander Elder and Larry McMillan come immediately to mind. You might also want to check out my own book which sets out a detailed approach to creation of a personal plan and a detailed explanation number of strategies and ways to reduce and avoid risk. Many of the brokerage firms offer webinars that can be very helpful to most levels of traders, and folks like my publisher, John Wiley & Sons, and Trader's Library have many helpful writings and DVDs in their catalogs. In general, checking those sources can help avoid scams.
Bill Kraft

Bill Kraft, MarketFN.com said...

Thanks for the wise words, "nofoolinpoulin."
Bill Kraft

Bill Kraft, MarketFN.com said...

Very interesting comments, Anonymous.

Thank you very much for the high valuation of my book. I genuinely appreciate it. Several thoughts come to mind. First, I agree that much of the information a trader may want is already out there. That, of course, doesn't mean that any one of us knows it all. There are many ways to gain the knowledge, some easier, some very hard. Uneducated trading is undoubtedly the hardest on the pocket book while reading and attending seminars may be the easiest and most efficient.

I have to agree that a lot of the teaching out there may not have exactly what I want, but I found the same problem with my old college and law school classes. I look at things a little differently now. I read and go to many "teachings" and find I get something out of almost every one of them. It may be only that I learn a given teaching is something that does not fit into my plan or concept, but now I no longer have to be concerned with that strategy or method or approach. At least I am aware of its existence and that may become valuable later. Anyway, thanks, again, Anonymous.
Bill Kraft

Bill Kraft, MarketFN.com said...

To Anonymous regarding Investools. Thanks for the valuable information about the program. Without meaning to comment one way or the other on Investools specifically, I agree with your suggestion that though the prices may sound expensive, the information may be well worth the cost. In my coaching sessions, I have seen students make the whole cost back in a single trade and that can certainly be the case with other educational programs. In addition, a student may learn something that avoids a loss that is greater than the tuition he paid. Thanks, too, for the kind comments about "Trade Your Way to Wealth."
Bill Kraft

Anonymous said...

Bill,
The dilema is how to seperate true investor education (like your great book!) from ending up sitting in a "come-on" free seminar from real education. I'm looking at subscribing to VectorVest, and it SEEMS good, but how does one know it's not just making them rich and leaving you $600 lighter? !!!

Mike said...

I wasted $23,000 on Investools plus another $4,000 for travel expenses. I received DVD's which contained numerous, numerous errors. My coach spent half our time together either reading the manual for the first time or writing down the stocks I was trading. At the sales seminar they said one of the advantages to their website was as a central source of news stories on any company I was interested in but many are links to other websites selling buy/hold/sell timing services. Finance websites by Yahoo, MSN or Google had more pertinent stories. Their website is full of advertising to sell add ons which is distracting. They call once a month trying to sell courses in other trading products. I waited on HOLD for long times after calling their help line only to end up speaking to a young person a few months out of college and enthusiatic about taking the course since it was part of his/her compensation. Every live seminar I attended was sent on at least one break so the instructor could close a trade because he/she was receiving signals from the people in the back. I should have known Investools was a ripoff - the guy leading the sales seminar at one point said he and his wife sat down together on Sunday evening and decided what stocks to buy (easy money) but then later in the sales seminar talked about having nine screens in his home office. I know now these instructors only made money via day trading because most of them had worked at Safeway together and they admitted they would instant message each other to take advantage of many sets of eyes. It wasn't "Invest"ools. The bottom line is value - I spent at least 30 hours every week for the first year trying to prove to myself I had made a good decision but eventually realized it wasn't a time saver. Yeah - I had a few trades where I made back the cost of the course but I've had many more trades where I lost the same amount and then some. I knew there were lower priced educational companies/services avaialable but assumed since Investools was charging the most they would be the Cadillac but I was mistaken.

Bill Kraft, MarketFN.com said...

Unfortunately, Anonymous, it can be difficult to separate the good from the bad in investor education. One way is to buy books published by reputable publishers like my own publisher, John Wiley & Sons, or by Traders Library or McGraw-Hill. If you are interested in seminars, ask them for the names of some students who have taken the classes and try to contact them to see what they have to say. If they won't give you names, you may want to go elsewhere. Word of mouth and reputation can be very good guidelines, though even with the best there are critics. Thanks for the kind words about my book.
Bill Kraft

Bill Kraft, MarketFN.com said...

Thanks for relating your experience, Mike.
Bill Kraft

Anonymous said...

Hi Bill:

I read your weekend newsletters all the time and agree with just about everything you say. I have really tried hard to learn to trade successfully and have taken many expensive trading seminars. I had really big dreams of making trading a successful part time home business. I have a very strong interest in trading options and option combinations and have no problem learning and understanding these sometimes complicated strategies. The problem seems to come when I try to implement these strategies. The market seems to move against my position either because of factors I forgot to consider or because of factors I haven't learned yet. I have really hit a wall and don't know how to procede. I really can't afford to spend more on seminars. (Believe me I have spent thousands). Any suggestions?

Anonymous said...

Hi Mr. Bill:

Let me begin stating that ever since I came accross your newsletter I have been quite impressed with your way (in general). I moved to this magnificent country just five years ago and after researching and looking at all the amazing opportunities there are in this land, deep inside myself I decided that trading is the one that really moves and motivates me the most (besides the fact that the stock market it is somehow the essence of capitalism and to me a " symbol" of this country).

About nine months ago, after attending a seminar (bad one), subscribing to a newsletter and purchasing a trading system, I started to trade stocks. I have had no previous experience but I thought that all of it was good enough and that I could just do it; so I went ahead and put some money into it. As of today my account is at 50% of the original amount I initially decided to trade, so finally I understood that I am far from having what it takes to be a succesful trader and decided to stand aside and do only paper trading while I begin doing some serious studying and training. Fortunately, the amount I decided to trade was money that I could afford to risk, however, that does not justify my stupidity and ego, even more if I consider that I really do not have money to throw away like that. On the other hand I realized I was able to stick to some rules and to apply some discipline to my intuitive trading, otherwise my account should be completely wiped out (so I hope there is future for me in this business if I take it as such). In any case, the idea of me writing so much is to applaud your insistence on the importance of continued education. I believe even though you may be very knowledgeable, you will never know it all, and I really like the way you express and emphasize this vital concept.

It has been a while now that I've been looking around and evaluating different educational alternatives, but so far everything I find gives me the feeling of people just selling their product, but no one really willing to teach and support (for doing that I rather buy a home study course). I just wish you go back to doing seminars so I could register immediately !!!!! In the mean time, I just ordered your book in Amazon and I will keep enjoying your Weekend Newsletter, which by the way, I went through all of them in your site and I simply love it!

Keep up the good work and thanks for sharing your knowledge and experience in such a detached manner.

Ernesto.

Bill Kraft, MarketFN.com said...

Anonymous, you ask a very difficult question and that is how do you become a successful trader without spending more money on education. Since I don't know what you have been doing with regard to a business plan, exit strategy, and entry strategy it is almost impossible to answer. Often the answer is in the individual's reactions to market moves when entries fail to consider a good reward to risk potential or exits through reactions rather than through pre-planning. I would suggest you carefully review your past trades to see whether your entries were greed driven or based on some good technical reason and whether your exit strategy was in place BEFORE you entered a position. Though you sound like you are unwilling to spend any more money, my suggestion is that you consider a one-on-one coaching session designed specifically for you or stop trading until you have reviewed your past trades and discovered the problem(s). Once you have discovered the problem, you might want to paper trade to see if your solution appears to be correct. Good luck.
Bill Kraft

Bill Kraft, MarketFN.com said...

Thank you, Ernesto. It sounds like you are doing the right things now. I hope you find some valuable information in "Trade Your Way to Wealth" and thank you for ordering a copy. Incidentally, there is nothing wrong with home study. I did and do more of that than anything, though as I indicated, I have attended a lot of seminars.
Bill Kraft

Dario said...

I believe that education is essential for success.

I studied Technical Analysis, plus I read "Trade Your Way to Wealth" among other books as the author as JJ Murphy, Steve Nison, Stan Weinstein, Alexander Elder, and so on.

I live in Argentina and I've invested in the stock market for 2 years. But I decided to start investing in the U.S. due to greater opportunities.

I opened an account at one of the major brokers in the USA and it turns out that my account had not applied for Options (only for Write Covered Call) or to "Margin Account" and therefore can not make Short Selling. The margin account requires $ 2,000 and I amply surpassed that figure. I understand that they may want to look after my interests because of that trading on margin involves risks, but what is the risk of only being able to be long in a Bear Market?

What should I do with all my experience if I explained all this to my broker and do not give importance only say:

"Thank you for your interest in opening a margin account. At this time, the main margin was unable to approve your application. This decision is based on the information that you have provided to us on the margin application. When reviewing accounts for margin / option approval.
You may re-apply at any time in the future if the information you provided should change, and we will be happy to re-evaluate your account based on the new information. "

What should I do with my knowledge when my broker takes this decision and will not let me apply?
As was supposed to get benefits being in a Bear Market Long and sell covered calls?

Thanks

Dario
Argentina

Text translate by google

Bill Kraft, MarketFN.com said...

Dario, thanks for the great note. It makes me grit my teeth to hear a brokerage firm tell us how it is trying to protect our interests after their part in nearly destroying our financial system. For the most part, they have little interest in protecting you; they are interested in protecting themselves, and only protecting you insofar as it may avoid a lawsuit. If a broker won't permit you to make the trades you want, I suggest you change brokers to one who will. You are so correct that you do not want to be trading against the market so if you don't have a broker who will let you make bearish trades in a bearish market, the only alternatives are to change brokers or don't trade. May I suggest you check out someone like OptionsXpress (at www.optionsxpress.com) or some of the other online brokers to see whether they would assign you a level that would permit you to make the trades you want to make. After all, it is your money.
Bill Kraft

Dario said...

Thanks for the advice.

I am glad to know that I was right!

And Thanks for your passion for trading!

Dario

John said...

Thanks for the info Anonymous. I have since gone to one of the free intro seminars for Investools and the sales pitch works. I was very tempted, however, I am an analyst and need info to make an informed decision. I talked to one of the attendees who had purchased the Masters program and his insight is that is it not a "system". You have to develop your own strategies, they just give you the tools to do so. I am curious as to your own experience did you find value and of course profit in the program you purchased.

Bill could you give me some insight as to the tools you currently use. I am a subscriber to your Options Trader and am curious what tools a professional trader utilizes.

Any help would be appreciated.
Thanks, John - LA

Bill Kraft, MarketFN.com said...

John, my main tool is a charting service. I use Worden Brothers Telechart Platinum and their relatively new "Blocks" which, I understand is about to be renamed. I also use a subscription software program from OptionVue for volatility analysis and performing "what ifs." I am able to do everything I want with those tools and what is available on my brokers' sites. My philosophy is to keep it simple.
Bill Kraft