Sunday, October 18, 2009

Considerations in Selecting Educational Programs for Traders

Looking at an email inbox numbering 1934 and listening to my Pandora station, I noted that many emails ask me to recommend training programs for traders.

Alas, that's an impossible task.

The reason is that training programs need to match what (and how) developing traders want to trade. The best educational offering in the world isn't worth the time, money, or effort if it isn't teaching you what you want to learn and leveraging your talents and skills.

What that means is that due diligence is key in evaluating any educational program. If the program is legit, it will have a well-developed curriculum that instructors are willing to share with you. The curriculum should highlight the specific information that is imparted, skills that are taught, and ways in which skills are introduced and drilled. The curriculum should also highlight the types of trading that are taught: the holding periods of trades, the markets traded, and the risk/reward of the setups taught.

If I am interested in a medical school, I can learn not only the specific courses that are taught, but also who teaches them and how they are taught. You should demand no less from an educational program in trading. If you cannot obtain details, assume that the details haven't been thought through.

Similarly, it is important to balance the cost of education with the need to protect one's trading capital. Personally, I would never spend more than 10% of my trading capital on educational products, services, and software; my actual expenditures are considerably less. That isn't to say that there aren't good, expensive services out there. It simply means that, just as a high school student with limited funds would think twice before applying to an expensive private college, a trader with limited capital should think carefully before laying down the equivalent of an Ivy League tuition for trading seminars and programs.

Finally, make sure that what you would learn in a commercial program is meaningfully different from what you can obtain free of charge (or for limited cost) in the public domain. Spending hundreds or thousands of dollars for the same technical analysis setups you could read in a dozen books makes no sense whatsoever. Sadly, it happens all the time.

A good educational program is one that teaches unique information and skills that are directly relevant to the kind of trading you are pursuing. It teaches that material in an engaging manner that allows for hands-on, practical learning through experience. Ultimately, your best teacher will be market experience. Good training programs don't produce expertise or elite performance, but they can hasten the learning curve.