Lately, on Twitter, I have seen a surge of “premium” services. The pattern goes something like this: someone posts charts with increasing frequency, and could not possibly enter all the trades. Then if a few of those stocks do well, they will retweet themselves in order to gain more credibility. Over time, they collect followers. Eventually, they would offer a premium service for $100+ a month and cease the barrage of charts. Of course, they would come back to Twitter to tout the amount of money their subscribers are making with their premium services.
Here are the two main types of services I’ve seen, and to which I would not subscribe:
The Retired Trader
From acquaintances who have subscribed, I have come to learn that certain services are similar to what they had seen from the person on their free Twitter feeds. Subscribers are fed many charts, some of them turning out to be good trades. The premium service would make a spreadsheet of all the trades that triggered and how much money those trades would have made. The sheer number of trades daily makes me suspicious of how many would have had the luck to pick the great ones, and how much money people are losing by picking the wrong ones. The official spreadsheet, though, will have caught all the good trades and lost very little money on the bad ones.
With the number of subscribers some of these people have, they no longer need to put their own money at risk in the markets. In fact, they probably make more money from their subscribers each month than they had ever made trading the markets.
The Pump and Dumpers
There are the services that entice people with small accounts. They claim to be able to help small account traders make a consistent income by trading penny and thinly traded stocks.
They call out trades multiple times a day. They are always the first ones in, and when everyone else starts chasing, guess who is selling?! Within minutes, the gurus have made their money, while everyone else is left holding the bag.
Oh, I get it. Not only do they make money from your subscription fees, you are also giving them money through the stock market!!
The Legitimate Service/Chat Room and its Advantages
I know that there are legitimate services out there with great traders at the helm. Instead of spoon feeding charts and calling out trades ad nauseam; along with offering trade ideas, these people teach their subscribers how to trade. I have great respect for many who offer premium services.
Trading is a lonely profession. One may sit in front of the computer all day: during the day, to trade; during meal times, to eat; and during evening hours, to do scans and analyze charts. (Yes, I confess that I often eat lunch at my computer.) There is an advantage of being part of a community in order to exchange ideas and sharpen one’s skills.
Why People Subscribe
Stocks only go up, down, or sideways, correct? By looking at the self-promoters, many people are led to believe that trading is easy. After all, one can make money in any market just by buying stocks that go up, short selling stocks that go down, and selling option premium and enjoying the theta burn on stocks that are trading sideways.
People are lured into thinking that by following a guru, they can make extra money each month. Some may even have dreams of early retirement from all the money the stock market is going to dump into their accounts. The gurus will do the work, while they invest their money in the right idea at the right time, as supplied by the guru. They do not have the time to put in the work themselves, so why not pay someone else to do the work for them?
Sadly, this type of mentality will only drain one’s savings.
In fact, many people who get into day trading have successful careers and have above average intelligence. In their own careers, they believe in hard work and ownership of their work. Unfortunately, most learn the hard way that the stock market requires the same type of discipline, hard work, and ownership.
The Only Way that Works
I am not above it all. I have fallen prey, for a short period of time, to the unrealistic dream of finding the right guru and pulling money out of the stock market, at will.
Fortunately, I woke up from that dream quickly enough to save my trading account.
I found out that the only way to make trading a lasting career is through hard work… and lots of it.
Each person has different strengths, risk tolerance, expectations, style, and account size. Just because someone can make a consistent income trading micro caps does not mean that I can. And I honestly can’t!
By studying on my own, I have learned the market conditions under which I trade best; I have developed a list of stocks that I like to follow; and I have found the setups that work best for my temperament and risk tolerance. I go through many charts a day, and will post on Twitter the ones of the trades I would actually take. Twitter becomes my journal and makes keeps me accountable.
The funny thing about trading is that even though different people are trading the same stocks, they may have vastly different results. If I see someone else’s charts posted on Twitter, I may lose money trading his setup while he makes money. Our timing may be different; our entries may vary; and our exits may not be the same. I confess that I have lost money following others in going long stocks that seemed to have done nothing but go up all day.
I have nobody to blame but myself. I am responsible for my own trading.
I did not become successful in my previous career by having someone else do my work. In fact, I would have been considered a fraud if that were the case. Day trading is no different. If I want longevity and success in this career, I must put in the work myself.