Risks of Looking for a Mentor to Learn to Trade & How to Avoid Getting Scammed

In the past I wrote about why those looking to find the exact details of how to successfully trade by books, courses, clubs, seminar’s, etc, were likely doomed to failure. 

 

My conclusion was the likely best path outside of finding a legitimate mentor is biting the bullet and making the determination to learn to trade on your own.

I was not positive on seeking help from a mentor since there are a ton of fakes out there and the threats they pose to your success are greater than you may imagine.

The bottom line of successful trading is based on one’s ability to determine the following:

1. Market trend for the time segment you are interested in trading.
2. Optimum entry zone area to place your trade.
3. High probability target area where you exit for profit, and additional target point(s) if you have runners.

Your stop should be beyond your optimal entry zone such that price moving to that level is a signal that your price movement assessment was wrong and you need to exit the trade and reanalyze.

All these things should be determined BEFORE placing the trade. The first problem I see with many “mentors” is they promote only figuring out an entry beforehand and then figuring the rest out as you go along real time. In the age of high speed trading algorithms, this is basically suicidal as there is no way you can reliably react fast enough to market activity against computers that can make thousands of trades per second. The market can turn against you in a split second and there will be no time to start “analyzing”.

Learning to trade successfully is very difficult as shown by the greater than 90% failure rates attributed to many studies.

As hard as learning to trade is, there are big risks in seeking a mentor. The first more obvious risk is wasting your time and money on someone who actually can’t trade. People have spent tens of thousands on signing up for “special” trading classes or sessions that were promoted as sure fire routes to trading success, then when they fail, the customer gets burned by being blamed as not trying hard enough. In truth, the mentor never knew what they were doing and their “expertise” was selling trading courses.

The more dangerous and insidious risk of hooking up with an incompetent mentor is the corruption and poisoning of your mind. If you are fed garbage theories and techniques for trading, you will be trying to fit your understanding of market movement with WRONG assumptions you think are FACTS, which results in you being hopelessly off track in finding actual reliable and repeatable solutions. Any natural solutions your mind might discover will be suppressed by trying to force fit market movements into the phony structure created by the quack mentor.

This is why there is great risk with any information provided that is coming from a non certified source. Some people think that a mentor is harmless or legitimate if they provide free information or don’t charge for their services. But bad information is still bad information regardless of whether one paid for it or got it for free. In the age of people getting paid for viewer clicks, the incentive is to just make info that looks good and attracts people with little regard to quality or accuracy.

You see these suspect fake mentor videos all the time. They supposedly are showing you past trades they made, but they are invariably quiet on exact details and planning to satisfy all criteria of entry, target price, and stop areas and make like they are figuring it out on the fly. 

 

Finding a Mentor that Actually Knows how to Trade

Your first and foremost resource to check is your family tree to see if there is a relative that is actually successfully trading. They likely won’t tell you their exact trading techniques, but they will likely be a great resource for looking at your trading plans and giving you insight on how to go forward. 

 

Testing a Mentor

The only way to be sure your prospective mentor knows what they are doing is to get concrete proof from them and not just accept their word or testimonials from others.

They can prove their legitimacy the following ways:

1. Show you their tax forms showing that they truly earn a living by trading income rather than selling trading education.
2. Demand to see them trade live for at least 3 weeks to a month and have them talk through ALL their trades. Note, it’s critically important you see ALL LIVE TRADES not explanations of past trades. You want to see if they can explain their logic in an understandable way and that they are the ones who are actually trading. I see many videos online where the “trading mentor” looks like they are struggling to make sense of a trade as if it wasn’t their trade, but are trying to tap dance their way through a successful trade someone else did.

Watching someone trade live over several weeks will tell you what their consistency and profitability is. Also make note if they are consistent in using an understandable and repeatable method to determine trend, entry price, target price, and stop, or if it looks like they are just winging it. Someone just trading on the fly is not going to help you with making a trading plan even if they trade successfully.

The vast majority of trading mentors promoting themselves will avoid being cornered to prove their legitimacy which are red flags that they should be avoided.