Why do trading academies fail?
It’s no secret that running a trading academy is a highly profitable business, but that doesn’t mean it’s an easy one. Lately, there’s been a lot of competition. Many “successful” traders venture into creating their own companies.
There are several reasons why people start their own academy. Some do it because they want to share their knowledge with others and help them achieve what they have accomplished through trading. Others do it simply to make more money.
In Latin America, one of the main reasons is the lack of capital for the trader. However, it’s not common to make a living from trading with little capital. Nevertheless, having an academy is a good way to finance their life, pay the bills, and at the same time share their knowledge, thus changing some lives.
Like any entrepreneurial endeavor, the chances of surviving over time are very low. It’s quite a staggering statistic that 95% of companies don’t last more than 4 years, and trading academies are not exempt from these numbers.
Here, the idea is to review some of the possible causes for an academy to close its doors in the medium term and find a way to cope with them. On one hand, there’s the hopeful marketing of the competition, lack of presence on social media, unclear strategy, lack of trust from traders towards their coach/mentor, unaudited results from the academy’s creator, among others.
So, let’s take a look at some of these causes that we have been able to identify through our experience after partnering with more than 80 trading communities.
1. Mindset of traders
The first reason I want to address is the mindset of traders, or rather, future traders. They enter this profession with the idea they’ve been sold that trading can be easy and quick to make a living from. And when they realize they can’t achieve it, the blame most of the time falls on the academy.
This is where negative comments, dissatisfied clients, strategy changes, academy changes, and more come into play. It becomes crucial to convey the reality of the industry right from the start and ensure that traders begin their journey by understanding the different scenarios they may face.
2. Hopeful Marketing
Related to the previous point, many influencers and traders sell a false idea of what trading is. They showcase luxury, travel, women, and a lifestyle they supposedly achieved through trading. It doesn’t mean that nobody has achieved it, or that it can’t be achieved. There may be a trading Messi who can achieve all of this, but it’s not the most common scenario.
These types of traders attract a lot of attention and pose great competition for new academies that want to have a more conservative and grounded marketing approach. That’s why the most relevant factors become the students’ results and the quality of education, as the “product” will ultimately speak for itself. A great example of this is free educational content like ICT’s which has reached hundreds of thousands of people without the need to physically showcase their teachings.
3. Limited presence on Social Media
Some say “if you don’t exist on Instagram, you don’t exist,” and while it’s an exaggerated statement, it holds some truth. Nowadays, it’s essential to have a presence on different platforms where your target audience can be found. TikTok, YouTube, Twitch, Twitter, Instagram, Discord, Telegram – there are plenty of options to showcase your work, the value you provide, and the benefits of being part of a community of successful traders.
We are in an era where customers like to validate information, see the person behind the academy, verify the trader’s audited results, and stay in constant contact through various channels to generate greater engagement.
Academies that have a presence on multiple channels have a significant advantage over those that focus solely on word-of-mouth recommendations.
4. Untested strategies over time
As mentioned earlier, sometimes traders with limited capital jump into creating a trading academy without thoroughly testing their strategy over a long period. They end up teaching a strategy that may work in certain seasons or market conditions but lacks adaptability. This leads to discontent among traders who are learning because they don’t see quick results or witness both their own and their coach’s negative streaks, prompting them to quit trading or leave the academy with negative feedback.
5. Lack of trader follow-up
Knowing and teaching about technical analysis, trading operations, risk management, market structures, and more is one thing, but the practical application by the trader is entirely different. As many of us know, trading has a significant emotional and psychological component. Therefore, it’s crucial to provide ongoing support throughout the student’s journey so they can understand the various stages they may go through, which most of us experience. Help them see ways to overcome challenges and continue learning.
Regularly review their trading journal, analyze statistics, data, good trades, and bad trades according to the strategy, success rate, and the risk the trader is taking.
Without proper support and a well-structured process, traders will not develop properly, leading to dissatisfaction.
To conclude, there are more factors that can contribute to the closure of an academy, but here we wanted to highlight some of the most common ones.
Sometimes, achieving positive trading results is not enough to have a successful academy. Being a company requires a lot of work and additional knowledge to ensure its survival over time.
So, if you’re thinking of creating your own academy, consider these points and develop a strategy that allows you to address them in the best possible way. This way, you’ll be able to showcase your value responsibly and have successful traders throughout the process.
Sebastián Orozco
Head of Partnerships
