When Free Isn’t and Paying Makes Much More Sense


One of the things that comes up on a fairly regular basis in the forums and other trader hang-outs I visit is discussion of free information on trading, analysis, systems, and whatever. Of course, forums are generally exactly that – sources of free information and opinion. They can be a quite valuable resource. The two ones I like a lot are Trade2Win (wide ranging) and BabyPips (forex newbies). You can find me posting as Rhody Trader there and elsewhere.

Here’s where I have a problem, though. New traders often ask what book(s) they should read, course(s) to take, and that sort of thing. It’s a natural and advisable thing for someone just getting started to do – ask for guidance from those who’ve been along the path they are taking. The problem is invariably someone will say something to the effect of:

Don’t spend your money on that stuff.  All the information and answers you need can be found for free in this forum (or site, or whatever).

While I’m all for being thrifty and not spending money needlessly, there are times when a small investment can pay off many times over. Notice, I used the term “investment” there, because when you’re talking about educational material or something that is likely to help your improve your trading performance, that’s exactly how you have to look at it. And when you’re talking about investing you’re talking about what you get in return for what you put in. It’s a two-sided equation.

What’s the Value?
I had a conversation recently with the gentleman who was a real mentor of mine as I got started in the arena of professional market analysis. He was one of the founders of the company for which I worked. We oftentimes took the same train home in the evenings, so I had lots of opportunity to talk with him. He’s been in the markets since the 70s and has traded all kinds of different things.

The interesting thing, though, is that as successful as he’s been in trading and business, he’s one of the biggest bargain hunters you’ll ever meet. I don’t mean to say he’s cheap, as he has no problem spending money, but he knows how to get the most value out of what he’s paying. When I visited him at his office a few weeks back we got on the topic of spending and value. It’s a thing that some folks understand very well, but I think most do not.

Value isn’t always about how much or how little money you spend on something. Oftentimes that has little, if anything, to do with the price tag. Money, after all, isn’t the only thing of value you have. What about time, for example?

Time Isn’t Money – It’s More Valuable!
If a book that costs you $50 can save you 10 hours of searching for the same information across a wide array of websites, is it worth spending the money? Heck yeah! I don’t know about you, but my time is precisous. I need to make sure it’s applied in the most meaningful fashion, and flipping through websites hoping to find a little nugget here, and another one there, and yet another bit on this other site is not something I have time to waste doing.

Did I always think this way? Nope. I can actually tell you exactly when it started changing for me.

You see, I have done computer programming for years, though never professionally. It’s something I’ve used to my benefit during a number of stages along the course of my personal and professional devleopment. I reached a point a few years ago, though, that I realized I was being foolish. I’d been spending hours and hours learning programming techniques and developing custom website functionality to accomplish the things I wanted to on my various website projects. I figured that by doing so I was saving myself money. I was, but the cost in time made it a poor investment. Others with more skill and experience than myself had already developed the stuff I needed. I came to realize that it made much more sense for me to just spend the money and subscribe to a service, or buy some utility to serve my needs than to take the time to do it myself.

This was a lightbulb sort of moment. I realized I was spending something either way. It was just a question of what I should be spending. What’s my time worth? It’s hard to put an actual figure on it in most cases, but one thing’s absolutely for sure – the less you have the more it’s worth!

Consider this example. I can spend 20 hours on a project, or I can spend $200 to accomplish the same thing? If I value my time at $5/hour, then it makes sense to do it myself. If, on the other hand, I value my time at $100/hour, then it would be completely insane to not spend the money. Granted, there are circumstances where the value of the time spent on the project can’t be equated this way (spending time with loved ones, exercise, etc.), but you get the point.

Getting the Most Out of it All
It’s more than just being able to get an aggregated information source like a book, though. There’s also the issue of presentation and your ability to get the most out of what’s provided. Certain formats and approaches are better than others.

As I’ve said, forums and the like can be great resources. They are an excellent way to get answers to specific questions. They are about the least efficient way to learn about a broad subject, though. The information is scattered all over the place and you have to filter through a lot of banter, opinion, and just plain incorrect stuff to get what you need. And if you’re new to the subject, how do you even know how to do that filtering properly?

Keep in mind that forum sites are designed for discussion. They are not designed to transmit information the way a book or seminar or video is. It’s just a fact of their structure. The same can be said of many websites given the way they cross link and allow (or even encourage) the reader to bounce around without following a well intended course of learning. A well put together educational offering (and I’m definitely not saying that all fit the bill) is designed to build one topic on another as it progresses, and to provide the individual with the most efficient path to learning the material. Websites are often designed to attract traffic. Those two purposes are often in conflict.

And It’s Not Just Educational Stuff!
When I speak of value and trading related things, though, I’m not just talking about books and such. I’m also including services and other products. If there’s something which can provide you the information you need to trade effectively that does so at a lower cost (monetary or otherwise) of you doing it yourself, then it’s a good investment.

In a world where most traders are part-timers, this is especially important. I use services like Daily Graphs to help me identify good stock trading candidates because they help me quickly find the stocks which fit my criteria without having to spend loads of time looking for them myself.  I didn’t always think this way, as I’ve said, but I just don’t have a lot of time in my life to waste that way. Now I take advantages of tools and whatnot which can do thing more efficiently than I can myself, so I can focus my time on things which are going to generate more reward, in one fashion or another.

Know What You Need
All that said, though, there’s one important thing I want to leave you with. Being able to get real value from any time or money you invest in your trading is very dependent on knowing what it is you need. It doesn’t matter whether you spend five hours or $50 on aquiring information about something if it’s of absolutely no use to you. That’s a waste no matter how you look at it, so be conscientious and really think through what it is you need for the next stage in your trading development or to support your trading efforts effectively.


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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
** See John’s full bio.


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5 Comments:

  1. John Neave says:

    Hi John
    Thanks for some invaluable reminders.
    In my own development as a trader I have recently, finally experienced a ‘lightbulb’ illumination in realizing just how important FOCUS is. This relates in so many ways to obtaining true value for your time in all aspects of trading – and life generally for that matter.
    I have spent (wasted) countless hours over the past four years following up on every nuance of trading technique I have encountered through various means. Although I accepted early on that there is no ‘holy grail’ I still, constantly fell into the trap of thinking that there must be more effective methods than what I was currently using.
    Inevitably, this way of thinking led to a fruitless frenzy of wasting time, and money experimenting with various aspects of my trading. My ‘scattered’ thinking predisposed each experiment to failure because my attention would be drawn to another idea before I had given the previous idea sufficent attention to prove its worth or otherwise.
    Thus, I made it impossible to obtain true value for my expenditures. Hundreds of dollars wasted on systems or methods never personally tested for their value because there were just too many to keep up with and follow through on properly.
    I now understand what is involved in paying for true value. Whether you pay money or pay time – PAY ATTENTION, and FOCUS on extracting the full value from any expenditure.
    Regards
    John

  2. John says:

    This was sent to me by Steve W. I think it it’s nail on the head.

    Great post and couldn’t agree more. balancing cost against time especially. Time is a precious commodity and to be savoured whenever possible

    Your post is the kind of information I would have liked to have read as I was starting out. Not that I am that proficient, only been trading around 20 months and struggling to really find the best way of trading.

    I am not a lover of forums. The contradicting views defeat the object. You then scout for the answers yourself costing more time. After fruitlessly the forums you end more confused than when you started.

  3. Prima Haswidi says:

    Definitely a must read for a FOREX beginner like me. It indeed clarifies the polemic should we invest in some learning materials VS should we use the free ones?

    For me, learning from fee FOREX learning materials is a daunting and exhausting task to do. The greatest challenges are in finding:

    1. which ones to read?
    2. which ones are credible?

    With ten of thousand free learning materials available out there in the internet, it took me long hours of unnecessary and frustrating search to come up with some decent answers to the questions above.

    For a global learner type like me (http://www4.ncsu.edu/unity/lockers/users/f/felder/public/ILSdir/styles.htm), the problem is even greater: learning piece-by-piece from scattered materials like that easily makes me out of place and reduces my excitement to learn the subject…

    Therefore, I could not think of any better way to learn FOREX (or any other subject to that matter) is to invest in some good learning materials. I owe it to myself and I think you do too…

    Thank you very much John for bringing this issue up, excellent topic!!!

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