Job #1

First, we should make one thing extremely clear to anyone who is still learning to trade and looking for a fee-based trading coach or mentor to clear some hurdles or accelerate the learning curve. The number one job of a trading coach or mentor is to put themselves out of business. Yes, you read that correctly. A coach who does their job properly will ultimately be fired by the client because the client can function on their own. That is the ultimate goal for the mentor. If the trading coach you are considering does not subscribe to this philosophy then you should run as far away as you can as fast as you can – that is someone who is only interested in how much money they can milk out of you.

Check Profitability – the # 1 proof of trading skill

Probably the most important thing to look for is whether or not your prospective coach can prove their skill – via brokerage statements or better yet, standard 13+ column spreadsheets prepared by a 3rd party accountant. It is unrealistic to expect the trader/coach to be profitable in all years, especially their early years but overall, the trend should be mostly profitable years.

One of the biggest sticking points is going to be the level of draw-downs you see in the trading accounts of your prospective fee-based trading mentor. If they are or used to be active traders, then over time they have probably become used to large swings in their accounts using substantial leverage as necessary at times. So, you need to look beyond the draw-downs and be happy that you are getting advice from someone who is or has been consistently profitable. The chances are that these types of coaches are going to be hard to find but when you do you will also find that they are very very busy. So, be patient and wait your turn. The good ones will give you lots of things to chew over before you even start their program.

If, ultimately, the draw-downs or account swings bother you that much, just try to realize that YOU have control over how much risk you will take via your money management rules (which the coach should help you solidify). So, the coach’s draw-downs should not ultimately impact YOU in the long run.

One thing to note here: Many times performance reports are NOT sent to the client until much closer, sometimes even after signing a contract. Contracts can be contingent on those reports being provided during the first hour of coaching and many times under non-disclosure agreements. Many of the better coaches are registered with regulatory branches of the government which prohibits wide disclosure of performance numbers to the general public.

Check Communication Skills

A trading coach or mentor need to be able to communicate clearly. The easiest way to ascertain that is to read their published articles. Are they easy to read and understand? The next step is to pay attention during your interview process – you are usually both interviewing each other, many times over the phone. Is the coach saying things that make sense to you, that you understand? If they are using a lot of jargon and will not explain when you ask for clarification, then that is a red flag – not necessarily a reason to run, but definitely a red flag that you might not be the best fit for each other.