Pay for Performance Mentorship?

[ZOSO 10]

I've had a few struggling traders ask me to mentor them, meaning they want to learn to trade profitably, but I have a real issue of charging big money upfront even though I think my time is very valuable. These traders have already been through the educational service merry-go-round and are already out $000s with very little to show for the so-called training they received.

 

Rather than turning these people away, I was thinking about a compensation plan based on their success from trading based on what I taught them. In other words, they would pay me a percent of their profit over a one year time frame or something like that. If they fail, well I make nothing, a risk I'm willing to take with them because I know them well and I think they have the mindset to win, but perhaps lack the right tools.

 

What do you think is a reasonable cut of their net profits over what period of time? I'm open to any ideas as long they're fair to all parties.

Edited November 23, 2008 by ZOSO

[brownsfan019 17]

Good question zoso and an interesting arrangement you might have there.

 

In a normal hedge fund the fees are 20/2. I think this can give you a base to work from. Since the 2 management fee is probably not practical here, I would say somewhere in the ballpark of 20-40% of profits can work.

 

Setting this up will not be easy if you want to do it right - meaning, proper legal documents would need to be in place. If not, you can try a gentleman's shake, but keep in mind once the intellectual property has been taught, the end user may not feel like paying you for much longer after that...

 

It can be a good situation for all involved if done properly from the onset. But it will not be easy.

[Minis Trader 10]

You are right the educational system can cost thousands of dollars for just a few days. From there a trader can take advanced classes which can cost them thousands more and they havent even made a trade yet. Here are two thoughts for you:

 

1- Since you are taking all of the risk up front have them pay you 50% of their profits (on a month over month basis). They have no risk at all to them.

 

2 - Charge them the higher fee up front and offer a money back Guarantee if they dont make back their money over the next 6 - 12 months trading your system.

 

Hope this helps

[ZOSO 10]

You are right the educational system can cost thousands of dollars for just a few days. From there a trader can take advanced classes which can cost them thousands more and they haven't even made a trade yet. Here are two thoughts for you:

 

1- Since you are taking all of the risk up front have them pay you 50% of their profits (on a month over month basis). They have no risk at all to them.

 

2 - Charge them the higher fee up front and offer a money back Guarantee if they dint make back their money over the next 6 - 12 months trading your system.

 

Hope this helps

Those are good choices and you're right, I am taking on the risk so I have to be extremely selective and make a judgment if ones failure is do to poor method, psychological hurdles or both.

 

I'm inclined to go with option1 over a one year period. And although I'm not thrilled with taking any upfront money other than for out of pocket expenses, I'm interested to hear what you think the upfront fee should be for 2?

 

Thanks.

[steve46 12]

I think the subject of "due diligence" is an important one to introduce to this thread.

 

While one contemplates how to extract money from students (as is being done here), it is also important for students to have a way to make a realistic decision as to who to spend their time with.

 

I think the best way for a student to execute a due diligence process, is to ask and receive a reference (at least one or two) so that they can talk to people who have acheived success based on the teaching of a so called successful trader.

 

The interview process should include questions as follows

 

1. How long did it take before you started to make consistent money

2. What kind of drawdowns did you experience during the learning process

3. What if any additional software did you have to buy, what was the cost.

4. Did your screen setup become simpler or more complex

5. Did your pre-market process become simpler or more complex

6. How much time did your mentor spend with you on a daily and weekly basis

7. Did you spend time together via Internet connection, or in person

8. Were you able to relate to your mentor easily, or did it require some adjustment on your part

9. Were your mentor's instructions easily understood or did you struggle to "get it"

10. Describe your worst day as a student

11. Describe your best day as a student

12. When did you decide to leave that relationship and why

13. Do you continue to have success trading

14. Is trading your sole source of income

15. Knowing what you know now, would you enter into this relationship again

 

"Performance" is a two way street folks, sure the trader's time is important, but I think the student's time is no less important to him or her.

 

I think this comment brings a little more balance to the thread.

 

Good luck everyone.

 

Steve

[Minis Trader 10]

Those are good choices and you're right, I am taking on the risk so I have to be extremely selective and make a judgment if ones failure is do to poor method, psychological hurdles or both.

 

I'm inclined to go with option1 over a one year period. And although I'm not thrilled with taking any upfront money other than for out of pocket expenses, I'm interested to hear what you think the upfront fee should be for 2?

 

Thanks.

 

There are companies out there that charge anywhere from 2k - 5k for a two to three day program and there are back end sales of upwards of 35k after that innitial workshop. From what I remember trade the markets gets 5-8k for a week of mentorship (I think it is on the higher side). So to charge 2k - 3k up front for you teaching them seems fair to me.

 

You could also charge lets say 1k up front, to put some money in your pocket for your time and a % of their trading over the next year.

 

Hope this helps.

[waveslider 10]

Think about this from a business standpoint.

 

What you are doing is creating a stream of passive income when you take a percentage of your student's earnings. Do this with more than one student and you are creating multiple streams of passive income.

 

Ideally, the student will require incrementally less attention as they gain success (if the method and teaching are sound this could be true). In this case your business has scalability, in other words you are doing less work and making more money. Very desirable.

 

What I would recommend is that you have a requirement that the student starts with $XXXXX dollars in their account. That way you know they will at least not blow up immediately, and if they do make a decent percentage gain you will benefit significantly.

 

As a business owner I would not charge up front for an additional potential stream of passive income. I would carefully screen to make sure the student does have potential.

 

People who charge upfront aren't necessarily robbing the student, but they are damaging the student's ability to be successful.

Edited November 24, 2008 by Soultrader

[brownsfan019 17]

I just think it will be hard to collect once a student is successful. I mean, they could have a little small account that they pay you from and then have a completely separate 'off the books' account you'll never know about (unless this is done face-to-face).

 

IMO you are risking too much for the reward.

 

And that's why vendors charge up-front. Granted most know that what they are selling is trash, but even if it is good, how can you be sure to be paid accordingly?

[waveslider 10]

Not to mention how messy it would get as April 15 approaches....

 

How it would be done "in theory" would be to have students open an account with a brokerage firm you have a deal with. You have access to account statements, etc.

 

all of a sudden it's a major operation / pain in the a$$, and you used to be your own boss, work your own hours...

[ZOSO 10]

I think the subject of "due diligence" is an important one to introduce to this thread.

 

While one contemplates how to extract money from students (as is being done here), it is also important for students to have a way to make a realistic decision as to who to spend their time with.

 

I think the best way for a student to execute a due diligence process, is to ask and receive a reference (at least one or two) so that they can talk to people who have acheived success based on the teaching of a so called successful trader.

 

The interview process should include questions as follows

 

1. How long did it take before you started to make consistent money

2. What kind of drawdowns did you experience during the learning process

3. What if any additional software did you have to buy, what was the cost.

4. Did your screen setup become simpler or more complex

5. Did your pre-market process become simpler or more complex

6. How much time did your mentor spend with you on a daily and weekly basis

7. Did you spend time together via Internet connection, or in person

8. Were you able to relate to your mentor easily, or did it require some adjustment on your part

9. Were your mentor's instructions easily understood or did you struggle to "get it"

10. Describe your worst day as a student

11. Describe your best day as a student

12. When did you decide to leave that relationship and why

13. Do you continue to have success trading

14. Is trading your sole source of income

15. Knowing what you know now, would you enter into this relationship again

 

"Performance" is a two way street folks, sure the trader's time is important, but I think the student's time is no less important to him or her.

 

I think this comment brings a little more balance to the thread.

 

Good luck everyone.

 

Steve

I totally agree with your post.

[ZOSO 10]

Think about this from a business standpoint.

 

What you are doing is creating a stream of passive income when you take a percentage of your student's earnings. Do this with more than one student and you are creating multiple streams of passive income.

 

Ideally, the student will require incrementally less attention as they gain success (if the method and teaching are sound this could be true). In this case your business has scalability, in other words you are doing less work and making more money. Very desirable.

 

What I would recommend is that you have a requirement that the student starts with $XXXXX dollars in their account. That way you know they will at least not blow up immediately, and if they do make a decent percentage gain you will benefit significantly.

 

As a business owner I would not charge up front for an additional potential stream of passive income. I would carefully screen to make sure the student does have potential.

 

People who charge upfront aren't necessarily robbing the student, but they are damaging the student's ability to be successful.

 

I was never a big fan of upfront fees. What do you think is a reasonable starting account balance for someone who will be trading the S&P e-mini only (that's all I trade).

[ZOSO 10]

I just think it will be hard to collect once a student is successful. I mean, they could have a little small account that they pay you from and then have a completely separate 'off the books' account you'll never know about (unless this is done face-to-face).

 

IMO you are risking too much for the reward.

 

And that's why vendors charge up-front. Granted most know that what they are selling is trash, but even if it is good, how can you be sure to be paid accordingly?

 

The first step must include getting daily statements from the broker. I suppose you'd need a form of a service agreement between the parties, but if someone wants to screw another, there's little that can be done to stop them. This is a deal that is basically done in good faith. Relying on legal agreements to get paid is a loser in the long run.

[ZOSO 10]

Not to mention how messy it would get as April 15 approaches....

 

How it would be done "in theory" would be to have students open an account with a brokerage firm you have a deal with. You have access to account statements, etc.

 

all of a sudden it's a major operation / pain in the a$$, and you used to be your own boss, work your own hours...

Well, I don't want to get into the collection agency business, that's for sure.

 

Yes, I get the acccount statements and then send a weekly bill to the student(s). I'm not planning on scaling this, so I can deal with a small number of people.

 

If they are making money, that means I am also and I never have a problem paying taxes on earned income.

[brownsfan019 17]

The first step must include getting daily statements from the broker. I suppose you'd need a form of a service agreement between the parties, but if someone wants to screw another, there's little that can be done to stop them. This is a deal that is basically done in good faith. Relying on legal agreements to get paid is a loser in the long run.

 

Like I said, there's nothing stopping them from having an 'off the records' account where the serious money is being traded.

 

Sounds like you are a trusting person zoso (and that's an admirable trait) but unless you really know these people, you are putting yourself out there for quite a bit of manipulation and short changing. For example, I would probably do something like this if a close friend/family member asked and not think twice about. But if an anonymous person over the internet found me and asked, I don't think I could do it w/ the way you are suggesting here.

 

Here's an idea to help you get paid and teach at the same time - open a CTA or CPO and set it up so that the interested party must invest in your CTA/CPO for a specified period of time (some sort of lockout type setup like most hedge funds do). While the person is invested in the CTA/CPO, you can open a chat room or however you plan to do this and trade w/ them. They can start small and demo it, all the while you are making money from day #1 by trading the group account.

 

[phreddy 10]

Hi Zoso,

This will sound rude but no offense is intended:

Are you that good at trading that you will be able to teach these people how to make a small fortune?

If you are, why don't you make yourself a pile of money and give the mentoring 'pro bono'?

 

Bump: Hi Zoso,

This will sound rude but no offense is intended:

Are you that good at trading that you will be able to teach these people how to make a small fortune?

If you are, why don't you make yourself a pile of money and give the mentoring 'pro bono'?

[BlowFish 10]

Hi Zoso,

This will sound rude but no offense is intended:

Are you that good at trading that you will be able to teach these people how to make a small fortune?

If you are, why don't you make yourself a pile of money and give the mentoring 'pro bono'?

 

Bump: Hi Zoso,

This will sound rude but no offense is intended:

Are you that good at trading that you will be able to teach these people how to make a small fortune?

If you are, why don't you make yourself a pile of money and give the mentoring 'pro bono'?

 

And when you are done there perhaps you could come round and mow my lawn? Thanks.

[ZOSO 10]

Hi Zoso,

This will sound rude but no offense is intended:

Are you that good at trading that you will be able to teach these people how to make a small fortune?

If you are, why don't you make yourself a pile of money and give the mentoring 'pro bono'?

 

Bump: Hi Zoso,

This will sound rude but no offense is intended:

Are you that good at trading that you will be able to teach these people how to make a small fortune?

If you are, why don't you make yourself a pile of money and give the mentoring 'pro bono'?

I never said I could make anyone a small fortune or a large one. I have a trading method that is discretionary and highly successful for me. Can others be successful using it? That is the big question and really depends if they have the discipline to take the trade when presented and not get all hot and bothered if the trade goes against them and trying to second guess and everything else a novice does that undermines their results.

 

So, I'm looking to help traders who have overcome the mental demons, but simply haven't found a method that workd well enough to produce a consistent profit.

 

My time is valuable and I won't give it away for free, but I am willing to be an equity partner if what I taught yields profits for the student within a reasonable time frame, say a year. After that, the profit is all theirs.

 

So there you have it.

 

Happy Thanksgiving to all sentient beings.

 

Bump:

And when you are done there perhaps you could come round and mow my lawn? Thanks.

Do I have to provide the lawnmower?:rofl:

[phreddy 10]

Hi Zoso, thanks for the reply and for not taking offense, I do tend to be rather direct.

 

Perhaps I am being naiaive(sp) but I do believe that if I had "a trading method that is ... highly successful" I would make a fortune.

 

We are taught that just making 10 pips a time is the gateway to sucess and wealth. Instead of making a 10c trade and making a dollar, we make a $1000 trade and make $10,000.

 

It is the question that is or should be asked of all the 'My secret course on $97' sellers. If it is this good why sell it?

 

Again, no offense intended but you are someone of whom I can ask these questions

 

Bump: Hi Zoso, thanks for the reply and for not taking offense, I do tend to be rather direct.

 

Perhaps I am being naiaive(sp) but I do believe that if I had "a trading method that is ... highly successful" I would make a fortune.

 

We are taught that just making 10 pips a time is the gateway to sucess and wealth. Instead of making a 10c trade and making a dollar, we make a $1000 trade and make $10,000.

 

It is the question that is or should be asked of all the 'My secret course on $97' sellers. If it is this good why sell it?

 

Again, no offense intended but you are someone of whom I can ask these questions

[ZOSO 10]

I'm not selling it. My intent is to offer it to a few unsuccessful traders who I know and then take a cut of their profits if it works for them. If they fail, I get nothing. Frankly, I think the arrangement is quite fair to all parties. In fact, as brownsfan has pointed out, I'm the one who is at risk.

 

You're entitled to your opinion, but let's be clear: I'm not selling anything except for the opportunity for a few others to turn a losing proposition into a winning one.

 

Get it?

[waveslider 10]

you misquoted him, he said "I have a trading method that is discretionary and highly successful for me. "

 

you left out the key words "DISCRETIONARY" and "FOR ME".

 

Big difference.

 

One of the demons Zoso is undoubtedly talking about is greed, a big one that the rest of your message suggests you haven't overcome.

 

As the saying goes, look to hit a lot of singles, not home runs.

 

Sorry for the interruption...

 

Happy Thanksgiving from an expat in Canada, missing that turkey...

[phreddy 10]

you misquoted him, he said "I have a trading method that is discretionary and highly successful for me. " you left out the key words "DISCRETIONARY" and "FOR ME". Big difference.

 

True, my error. I was just trying to say that if I had such a scheme I would use it for home runs, lots of greed!

 

BTW I don't know what 'discretionary' means in this context.

 

I also didn't intend the 'selling' bit to apply to Zoso, I quite understand what he is saying and what he intends, or rather what he is contemplating. If I were one of his intended 'students' I would be willing to pay an amount of my returns provided it was not extortionate.

 

My problem, as the 'potential student' IN THIS SCENARIO, would be about how much of my money I have to put at risk for how much reward.

 

"The labourer is wothy of his hire" I believe is the quote.

[Guest MRC & Co]

you misquoted him, he said "I have a trading method that is discretionary and highly successful for me. "

 

you left out the key words "DISCRETIONARY" and "FOR ME".

 

Big difference.

 

One of the demons Zoso is undoubtedly talking about is greed, a big one that the rest of your message suggests you haven't overcome.

 

As the saying goes, look to hit a lot of singles, not home runs.

 

Sorry for the interruption...

 

Happy Thanksgiving from an expat in Canada, missing that turkey...

 

If it is a discretionary method, then it can probably not be taught.

 

If the 'trainee' has overcome his mental/psychological demons of trading, then how do you know, unless he is already profitable?

 

Stupid.

[BlowFish 10]

 

Snip

 

So, I'm looking to help traders who have overcome the mental demons, but simply haven't found a method that workd well enough to produce a consistent profit.

 

Snip

 

 

IMVHO this is likely to be a problem. Exersising the daemons is what is likely to determine success or failure. Once you have overcome the daemons just about any method can work.

 

Still, all credit to you anyway.

[waveslider 10]

MRC-

 

Discretionary trading is much more difficult to teach, but very possible.

 

The demons can exist but be under control. All they are are thoughts in your mind, and when you are aware of what they are, and when they come, then you disregard them and their power is dissipated.

 

What's stupid about that?

 

 

Phreddy- there are so many scammers in this business who charge huge amounts of money - and people pay them. Think of this business as any other professional business. You don't walk into a hospital, start swinging a scalpel around and then start cutting people up to become a doctor. Its YEARS of education.

 

Same in the trading business. Learning is EXPENSIVE, possibly more than required to become a doctor. It also takes time! YEARS for some just to get to breakeven trading.

 

Discretionary trading means using evaluation to trade the market. Systematic (algorithmic) trading is using mechanical systems (usually based on statistical data) to enter and exit the market. These are the 2 basic forms of trading.

 

Zoso- I think you are right that there are those who have overcome their demons and are still not profitable. They are the breakeven traders who know what NOT to do, but haven't found their edge to take them to the next plane. This is a difficult period in the evolution of a trader (from personal experience).

Your efforts to teach are noble, and you are risking wasting time and effort in teaching.. but some teachers find it very fulfilling.

[Guest MRC & Co]

A discretionary method is EXTREMELLY difficult to teach, because everybodies psychological makeup is different. Everybody has various risk tolerences, therefore get out/in at various times etc. Some like to fade a trend, some like to trade with the bias of the trend. Some like confirmation to get into a trade, others like to buy pullbacks etc. Once in a trade, some will let it run 30 ticks offside, some won't be caught more than 2 ticks offside. Some will let size run further offside, some will be tighter when they have size on the table. Some will let profits run and take profits when it 'feels' right, others will scale in/out the entire time. The variances in trading styles are DRAMATIC, hence, it is extremelly hard to teach ones trading style exactly to another (unless like the turtles, it is entirely rules based).

 

If you have a rule by rule trading plan, then you are probably a mechanical trader, and will have to update it in a discretionary manner anyways (hence the arguement between mechs and discretionaries always makes me laugh).

 

What are you going on about demonds existing but under control? We ALL rasstle with our demons every single day, this is particularly so for discretionary traders as they do not have a strict plan to use and intraday trdaers, whereby that plan would have to be tinkered with numerous times a day, and where days can look completely different from the next, not to mention, where you are constantly watching your trades and need the discipline to sometimes take profits and other times, give them room to move when you have conviction (telling the difference between the two takes a FINE eye). Having that conviction is an entirely different matter.

 

If you trade intraday for a living, I think you will understand me. If not, then you are probably a cliche, like the rest of the books you read.