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Trading Courses – Does it work?

Written By: Tiang Chuan on September 19, 2010 No Comment

Flip through any of the major dailies and you will see advertisements on various trading courses. The Sunday Times article on 19th September 2010 titled – Beware of easy money had on discussion on these courses.

According to the article, an investor lost more than US$3,000 in trading after attending a forex course a year ago. He also knew of others who have lost US$20,000 to $30,000 in one year. A trader who declined to be named was quoted as saying “… Anybody who claims that he can teach somebody how to make money trading forex after attending a course is ignorant of how the markets work“. There were 18 cases of complaints and inquires made to the Consumer Association of Singapore (Case) regarding theses programmes in 2008. There were 16 in 2009 and 10 cases so far in 2010. 9 cases in 2009 and 5 cases in 2010 were against Powerup Capital. Other firms involved include FX1 Academy and Momentum Asia.

The newspaper report suggested looking up Accounting and Corporate Regulatory Authority (ACRA) and MAS alert list for information.  I would suggest also looking up the MAS Enforcement Actions page to check if any enforcement action has been taken against the trainer or company.

Personally, I do not believe that trading skills can be taught over a 3 day course. There are a few questions that people should ask themselves.

Trading Secret

If you hold a secret formula to a successful business, would you share with others? Even if the trainer is so altruistic and willing to share, the formula would then become so widespread and prevalent that it loses its edge. Image being able to buy that famous black pepper crab in every coffeshop. Would it be still be special and command a high premium? There are successful traders and hedge fund managers out there. But they don’t tell you what they are going to do and how they spot the opportunity.

It’s Simple and Easy

If trading is simple and easy, there would not be any poor man left in this world. Everyone would become rich through trading.

It can make you Rich

Like what Jack Neo portrayed in the movie Money Not Enough, the ‘god-of-fortunes’ are not the betting outlets but the gamblers themselves. If the trading strategy works, why would the trader want to through the hassle of organizing courses and not trade himself? Assuming a 3 day course cost $4,000 and there are 100 participants. The total revenue is $400,000. Assuming cost is 50% of revenue, then the profit is $200,000. Not bad for a 3 day seminar! No wonder the traders would rather train than trade.

Super Returns

Some advertisements claims of super returns. There are a few things to take note here.

  • If the return is reported in percentage terms, on what kind of capital is the return achieved from? A 1000% return on $0.10 is just $1.
  • What ratio of trades achieve super returns? Or just positive returns for that matter? 1 super trade out of a 100 with can be just luck and not skill. As more and more students enroll, there will bound to be people who got lucky. The odds of hitting the first prize in Toto is 1 in 8,145,060. Yet, you still find people hitting the top prize week in week out. Can we call these winners skillful?
  • Is the returns consistent? Many super return claims are for certain periods only. Nothing is said for the period after that. A 100% return followed by a 60% drop does not leave you with 40% gain. The investor would have suffered a 20% loss.
  • Everyone can be a master trader when it comes to hind-sight investing. A 100% guaranteed strategy based on hind-sight is nothing more than a claim. I am a ‘master Toto trainer’ who can tell you the past winning numbers for  Toto.

Due to human greed and ‘kiasu-ism’, trading courses are ever-popular. Students are not even aware that the  trainers are not regulated. The irony is that due to the lack of regulation, many trainers put up all sorts of claims, and this has attracted countless students.

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