HELP! Close family member involved with Online Trading Academy

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Ew83
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Joined: Fri Oct 25, 2019 9:37 pm

HELP! Close family member involved with Online Trading Academy

Post by Ew83 »

One of my family members I recently found out is taking "classes" at Online Trading Academy (OTA) I can see it's a scam from a mile away, but she doesn't have a background in finance. I want to be clear, she is not a greedy or dumb person, quite the opposite, an engineer and in her 50's. She is just misguided.

What I would like help with is any white paper/short video/ article that can explain to her the odds of being successful in this venture (day trading). I would also ask for people with direct experience with this "school" but I fear any ancedotal evidence she will write off in her mind as "someone that didn't "get" it" or "didn't study/practice enough."

I don't want to recommend a book because I fear she wouldn't get around to reading it. OTA provides all the usual sales pitches and it sounds great for those that don't understand how this stuff can ruin you if you invest lots of money in day trading (not to mention the course is $50k!)

So if there are research papers out there that show the statical probability of being successful in trading please let me know so I can show her.

Part of me wants to stay out of this but I care about her and do not want to see her lose lots of money, so I feel like I need to say something. If anyone has a way to go about discussing this with her I'm all ears for that as well.

Thanks for your help!
runner3081
Posts: 3831
Joined: Mon Aug 22, 2016 3:22 pm

Re: HELP! Close family member involved with Online Trading Academy

Post by runner3081 »

Has this friend asked you for your opinion on the Online Trading Academy?

If not, I would back off.
Kagord
Posts: 542
Joined: Fri Nov 23, 2018 1:28 pm

Re: HELP! Close family member involved with Online Trading Academy

Post by Kagord »

I don't think Online Trading Academy is a scam. Obiviously, it is not the BH community's cup of tea. But, an inexperienced someone with an interest and fascination with day trading, may actually save $50K by taking these classes, that's who they are catering to.

Here's a review: https://www.youtube.com/watch?v=nL_6XBpOt4I

Edit, the first class is only $7K, yes it could be $50K if you keep going into options, forex..etc
Last edited by Kagord on Sat Oct 26, 2019 11:16 am, edited 1 time in total.
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F150HD
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Re: HELP! Close family member involved with Online Trading Academy

Post by F150HD »

This is your first post?

An engineer in her 50s- earns some leeway....maybe she just needs a new challenge or interest/hobby to match her intellectual need. Sounds like you're assuming she's selling her home and draining her 401 to trade stocks.
Long is the way and hard, that out of Hell leads up to light.
Shallowpockets
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Joined: Fri Nov 20, 2015 10:26 am

Re: HELP! Close family member involved with Online Trading Academy

Post by Shallowpockets »

She actually may learn things that could help her. Buy sell volume or spreads and other tidbits on the workings in the market and trading. Maybe she is curious. As an engineer she has math and analytical skills. Just because some reads a book about polar exploration does mean they are headed north on a sled.
Don't assume as a BH that you are the only way.
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Googliebear
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Location: Williamsburg, VA

Re: HELP! Close family member involved with Online Trading Academy

Post by Googliebear »

Ew83 wrote: Fri Oct 25, 2019 9:47 pm One of my family members I recently found out is taking "classes" at Online Trading Academy (OTA) I can see it's a scam from a mile away, but she doesn't have a background in finance. I want to be clear, she is not a greedy or dumb person, quite the opposite, an engineer and in her 50's. She is just misguided.

What I would like help with is any white paper/short video/ article that can explain to her the odds of being successful in this venture (day trading). I would also ask for people with direct experience with this "school" but I fear any ancedotal evidence she will write off in her mind as "someone that didn't "get" it" or "didn't study/practice enough."

I don't want to recommend a book because I fear she wouldn't get around to reading it. OTA provides all the usual sales pitches and it sounds great for those that don't understand how this stuff can ruin you if you invest lots of money in day trading (not to mention the course is $50k!)

So if there are research papers out there that show the statical probability of being successful in trading please let me know so I can show her.

Part of me wants to stay out of this but I care about her and do not want to see her lose lots of money, so I feel like I need to say something. If anyone has a way to go about discussing this with her I'm all ears for that as well.

Thanks for your help!
I agree with both F150HD & runner3081.

"JL Collins: "The Simple Path to Wealth" | Talks at Google" on YouTube
https://youtu.be/T71ibcZAX3I

"In Pursuit of the Perfect Portfolio: John C. Bogle" on YouTube
https://youtu.be/3uJbHREmUs4

If she doesn't garner any guidance or inspiration from either of these two guys, I would imagine you'll only be successful at upsetting her and changing your relationship not for the good.

If she chooses to engage with you after watching these videos be ready to guide and mentor (with lots more videos of JCB). If not, it's her life and her prerogative to choose her own path, regardless of the consequences.

I have both friends and family members who fall into this same category.

Good luck
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retired@50
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Location: Living in the U.S.A.

Re: HELP! Close family member involved with Online Trading Academy

Post by retired@50 »

You mentioned getting this family member to read something may be a challenge. Perhaps you'd be willing to read the following link. I read plenty of financial books, from a variety of perspectives, and the link below has been cited in a number of those books. It was a study that revealed that frequent trading is likely to hurt your wealth.

In addition to paying for this class, your family member will then get to watch a chunk of the portfolio disappear... My condolences. Regards,

https://faculty.haas.berkeley.edu/odean ... _Final.pdf
This is one person's opinion. Nothing more.
StealthRabbit
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Re: HELP! Close family member involved with Online Trading Academy

Post by StealthRabbit »

ironically, many of my ex -coworkers (all engineers) do OTA (or similar type) trading.

Not ez to beat the 'marketmakers', but some do fine.

ALL have profited (educationally / financial risk) by doing 100% 'Paper-trading' until they can achieve 80% success rates.

Some have lost a lot.
Some have been banned from trading by their spouses (who had expected 'retirement')

Learning is a good thing, especially for engineers.

Limit your exposure. (to all unknown risks).

I have know a few Retirees who have lost everything in retirement and started over. (including my parents and inlaws) Neither via trading.

One friend on OTA lost 80% to Madoff (unknown to him, FA had over-extended into Madoff, due to 'promised' returns)

Sharks out there.

1) determine her exposure / intent
2) Recommend no more than 5% total portfolio exposure to variable market trades
3) ALWAYS have an exit plan
4) Know when to 'fold-em'.
tibbitts
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Joined: Tue Feb 27, 2007 6:50 pm

Re: HELP! Close family member involved with Online Trading Academy

Post by tibbitts »

I am not familiar with the classes, but there's nothing wrong with exploring the subject through classes, unless someone has evidence that OTA is actually a scam. The fact that it teaches trading techniques does not make it a scam. Is anyone aware of other/better sources for classes in classes in trading?

Taking classes isn't equivalent to risking all your savings on your trading activity. Just like some of us own active funds, this may be just another hobby activity that might or might not pay off - but unless severely abused isn't likely to cause serious damage.
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HomerJ
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Re: HELP! Close family member involved with Online Trading Academy

Post by HomerJ »

tibbitts wrote: Sat Oct 26, 2019 11:01 am I am not familiar with the classes, but there's nothing wrong with exploring the subject through classes, unless someone has evidence that OTA is actually a scam. The fact that it teaches trading techniques does not make it a scam. Is anyone aware of other/better sources for classes in classes in trading?
OP says it costs $50k. I can't imagine the knowledge is worth that much.

Surely an engineer could learn nearly as much about trading through books for far less money.

And if a engineer doesn't like reading books, then I doubt they were ever actually an engineer.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
StealthRabbit
Posts: 528
Joined: Sat Jun 13, 2009 1:25 am

Re: HELP! Close family member involved with Online Trading Academy

Post by StealthRabbit »

tibbitts wrote: Sat Oct 26, 2019 11:01 am I am not familiar with the classes, but there's nothing wrong with exploring the subject through classes, ... Is anyone aware of other/better sources for classes in classes in trading?

Taking classes isn't equivalent to risking all your savings on your trading activity. Just like some of us own active funds, this may be just another hobby activity that might or might not pay off - but unless severely abused isn't likely to cause serious damage.
I like this 'option' <];-)
https://www.tastytrade.com/tt/learn/
(3 west coast events coming up during end of 2019)

Tasty-trade is an offshoot of what once was ThinkorSwim / Red-option-planet (Options trading training program, mostly was free / minimal charges for training to cover rented space). Before Ameritrade bought them out. (as they have ALL my favorite brokerages (4 of them)).

TT has a very good platform / training / users group / podcasts for options trading (often on indexes)
You can learn a lot of strategies and ask plenty of questions. (much of it is free)
http://tastytradenetwork.squarespace.co ... ner-center

Also hang out at Interactive Brokers and Investopedia and Etrade.
lots of choices (for a price)
Paying for the education is likely not necessary until your have waded in and determined you can hack the pressure / volatility.
https://www.investopedia.com/articles/a ... chools.asp

Suggestion:
Spend a few bucks for a quick trip to SFO and enjoy a weekend + FREE Options training

https://www.eventbrite.com/e/cme-group- ... ?aff=ebapi
https://www.tastytrade.com/tt/events
Last edited by StealthRabbit on Sat Oct 26, 2019 11:35 am, edited 3 times in total.
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nedsaid
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Re: HELP! Close family member involved with Online Trading Academy

Post by nedsaid »

F150HD wrote: Sat Oct 26, 2019 8:31 am This is your first post?

An engineer in her 50s- earns some leeway....maybe she just needs a new challenge or interest/hobby to match her intellectual need. Sounds like you're assuming she's selling her home and draining her 401 to trade stocks.
That is my take, people do such things because they are bright, are bored, and need a new challenge. Trading and trying to beat the collective wisdom of all market participants is very difficult to do but bored and bright folks sometimes cannot resist. It is hard to talk sense into such people, it is the triumph of hope over experience. It is really hard to tell the difference between knowing what you are doing and thinking that you know what you are doing, as they say, a little knowledge is a dangerous thing. Hopefully, the engineer will learn a lot about the market and minimize financial pain.
A fool and his money are good for business.
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arcticpineapplecorp.
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Re: HELP! Close family member involved with Online Trading Academy

Post by arcticpineapplecorp. »

welcome to the group.

I'm glad you're concerned about your family member. It's interesting to see the variety of responses so far. Perhaps you could have a conversation with your family member about her interest in online trading academy and what she hopes to gain from it (education, monetary or what). Specifically, I'd ask her what due dilligence she did before plunking down any hard cash (or I suspect, didn't do). Because if she did her due dilligence, she would/should have come to the conclusion that it's merely a system for separating her from her money.

At a basic level she should be asking herself, "If this system works so well, then why are they giving it to me? Why don't they just use it to get filthy rich themselves?" or "If the system works so well, why are they still working, promoting these seminars/workshops, etc? Why aren't they retired to their own private island?" See? It doesn't pass the smell test, right there. That doesn't make it a scam, but it says how they're really making their money....by selling systems to people, not by trading. Because if they made money trading, they'd just do that, and wouldn't bother selling systems, right?

Regarding doing her due dilligence, I would check to see if she's read any of the complaints with the better business bureau (they're illuminating):

https://www.bbb.org/us/ca/irvine/profil ... complaints

Secondly, I would see if she's read this Kiplinger article with someone who went "undercover" to learn about OTA and reported his findings here:

https://www.kiplinger.com/article/inves ... s-all.html
Instead, the seminar quickly evolved from a round of Wall Street bashing to a pitch to enroll in the company’s $4,990 Pro-Trader class...Overall, I left my free OTA seminar less than satisfied. I wanted to learn how to trade and all I got was a sales pitch.
Thirdly, I would ask her if she is familiar with Dr. Henrik Bessembinder's work. If not, then perhaps she isn't aware that only 4% of all the stocks since 1926 have created all the value of the stock market. Which means that she's searching for a needle in a haystack, when she could own the whole haystack and just get the return of the market (which has been generous and is fair). It's easy to find the 4% of stocks that created all the value in the past, but does she think she can find the 4% of companies that will create all the value going forward? What's more, of the 96% of stocks since 1926 that failed to create any value of the market, half of them actually did worse than investing in a t-bill (a riskless asset). So many people have taken uncompensated risk betting/gambling on individual stocks (instead of just owning the market as a whole and getting the return of the market). Read more here:

https://www.universal-investment.com/me ... ry%20Bills
https://papers.ssrn.com/sol3/papers.cfm ... id=3415739
https://papers.ssrn.com/sol3/papers.cfm ... id=2900447

Next, I would ask her if she's read this 2 page paper by Nobel laureate William Sharpe titled, "The Arithmetic of Active Management":

https://web.stanford.edu/~wfsharpe/art/ ... active.htm

Because if she's into OTA then she's into active management. She should know why active management is a loser's game over the long term.

Speaking of the loser's game, has she read Charles Ellis' "Winning the Loser's Game"? If not, she should because she may not have learned what's been known since this came out in 1975:

https://www.ifa.com/pdfs/ellis_charles_ ... e_1975.pdf

Is she aware that most active fund managers (read: stock pickers/traders) underperform the market every year (only 20% of active managers beat the market in a given year. Unfortunately for them, the 20% that outperforms isn't the same from year to year. So over time, most active managers are average before fees, and underperform the market after fees. The longer the time period, the more certain active managers are to underperform the market). If fund managers getting paid millions of dollars with crack research teams who are working 60+ hours a week to uncover the very best investments using very fast supercomputers spending millions of dollars to set up right next to the exchanges to execute their trades faster than anyone else can't outperform the market, what makes her think she has a better chance of doing so? What makes her think she can compete with the likes of them? See more here:

https://us.spindices.com/spiva/#/reports

that's enough for now. let us know if she's really into learning. Because there's nothing wrong with seeking information about day trading (which is gambling/speculating) but you should also do research that explains what are other/better ways. If you research one system but avoid other systems (like buy and hold) then you're closing yourself off and limiting your knowledge.

one last thought, when I see online trading academy referred to simply as OTA it reminds me of OTB (off track betting), which is not really that far off.

postscript: before she pays $55,000 for a system, she should try her hand (for free) to see if she can "Outsmart the Market":
Predicting the ups and downs of the market is trickier than you think. See how well you can Outsmart the Market.
https://www.prudential.com/cdn/tools/ou ... oolcta=OFF

If she can't win at that game (and it uses past, known data, not even future "unknown" data) then she should stop herself from playing for "real". There's a lesson to be learned in the Prudential Outsmart the Market game but it's a spoiler alert so don't read ahead if you want to learn the lesson on your own:

buy and hold beats getting in and out (trading) of the market.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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arcticpineapplecorp.
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Re: HELP! Close family member involved with Online Trading Academy

Post by arcticpineapplecorp. »

New info from SEC:

https://www.ftc.gov/news-events/press-r ... e-consumer
Online Trading Academy will be required to offer debt forgiveness to thousands of consumers who purchased its “training programs,” while the company’s founder and other individuals will together pay between $5 and $9.1 million and turn over assets under the terms of a settlement with the Federal Trade Commission that is expected to result in more than $10 million to benefit injured consumers.

In February, the FTC brought a lawsuit alleging that OTA, led by Eyal Shachar, had deceived consumers for years with claims that purchasers of OTA’s investment training were likely to generate significant income. OTA claimed that anyone could learn to use its strategy, and filled its sales pitch with testimonials and hypothetical trades showing significant profits.

The FTC alleged that OTA had no evidence that purchasers were likely to realize the advertised profits, and that the company’s own surveys and third party trading data showed that most purchasers made little to no money. OTA also claimed that its instructors and salespeople were active, successful traders, pointing consumers to their supposed success as evidence the strategy worked. But the FTC alleged those claims were false or unsubstantiated, and that several high-profile OTA pitchmen admitted they did not make significant money trading. Finally, the FTC charged that when consumers realized the truth and asked for their money back, OTA illegally used form contracts to prevent them from telling the government or other consumers about OTA’s deception.

“OTA pitched a get-rich-quick investment strategy using fake or unrepresentative testimonials, depictions of wealth, and implied promises of profits,” said Andrew Smith, the Director of the FTC’s Bureau of Consumer Protection. “OTA had no support for its lavish earnings claims, and that’s illegal.”

Under the terms of the settlement, the defendants will be prohibited from making claims about potential earnings unless the claims are truthful and the defendants have written documentation to support them. They will also be prohibited from making claims without adequate support about how quickly consumers can become proficient in the defendants’ trading “strategy” or the amount of time or money needed to generate significant income.

In addition, the defendants will be prohibited from calling their salespeople “education counselors,” and from misrepresenting that instructors are active or successful traders.

The settlement also prohibits the defendants from using contracts that prevent their customers from interacting with law enforcement or posting reviews about the defendants online. It also requires the defendants to notify consumers of their right to post honest reviews and file complaints.

The settlement includes a monetary judgment of $362 million, which is partially suspended due to the defendants’ inability to pay. If the defendants are found to have misrepresented their financial status, the full amount of the judgment would become due immediately. The settlement requires Eyal Shachar to pay $8.3 million and surrender a number of vehicles to the Commission, including a Cessna 400 airplane, a 2006 Bentley Mulsanne, a luxury motor home, a Cadillac Escalade, and six minivans. Darren Kimoto must pay $736,300 and surrender a 2017 Land Rover, and Samuel R. Seiden must pay $158,000. The cash and the proceeds of the vehicle sales will be used to provide refunds to affected consumers.

In addition, the settlement will require OTA to offer debt forgiveness to consumers who have debt owed to OTA for its training. The company will be required to give these consumers notice of the offer of debt forgiveness and consumers will have 45 days to request forgiveness. Consumers who elect forgiveness will lose access to any OTA courses they have purchased.

The settlement terms allow that for every dollar of debt forgiveness that OTA customers accept, Shachar’s required payment will be decreased by 70 cents, up to $4 million.

The Commission vote approving the stipulated final order was 4-0-1, with Commissioner Rebecca Kelly Slaughter recorded as not participating. The FTC filed the proposed order in the U.S. District Court for the Central District of California.

NOTE: Stipulated final orders or injunctions, etc. have the force of law when approved and signed by the District Court judge.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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