Stock Trading and Other Things

Why not stock trading signal provider survive on themselves if they are so successful?

would like to know whether earning from stock trading signal service is more than the investment itself? Why not service provider trade themselves and survive on their own?

Public Comments

1. This is a very valid question. One that I have asked myself. I have spent thousands on stock recommendation services. There are two major issues with this concept: 1) can you get filled (actually do the transaction) at the price and time that the signal comes? and 2) commissions eat your small profit. Between the slippage and transaction fees, you profit is gone.

If you were to find a stock signal provider that you liked, they must have a finite limit to how many people could participate. If you get too many traders following the same signal, it moves the market and that signal system no longer works.

Personally, I never found a service that was worthwhile. You can checkout Collective2 to see they have a better answer.

My conclusion is that any rules based system is destined for failure. But, I could be wrong. (If you want an example, just consider the guys at Long Term Capital Management.)

2. Trading is a difficult business, and it's hard to make money consistently. Charging people for trading advice, however, brings a much more steady income, and possibly a much higher income, depending on your membership.

You're right though, if someone claims to be able to make large consistent profits through trading, then they should be trading, not selling their strategy.

3. see if signal provider will trade on his signals ..his prediction will be biased towards his own trade and he won't see those signals or avoid them which are sending the trade towards south wards direction so he/ she avoids trading on his own signals...

4. Your implication is correct. The truth is;
A. It's less risk of capital to supply a service. They win either way.
B. Always know... as good as a service is... you'll never duplicate their results.
C. A good swing trader is happy if they get 50% of their trades correct. This can be very scary
for a novice.

5. Many people are afraid to make a decision on which stock to buy/short on their own. They look to someone who sets themselves up as an expert, and then pay them for their recommendations.

Most stock gurus that sell subscription services aren't the best traders in the world either. I honestly believe they make the bulk of their money from selling their services. The stock gurus issue lots of recommendations, some of which will run up big. Those big winners are the ones you see advertised heavily. But they don't tell you about their losers.

Once you subscibe to a service, you're often hooked. If the market is going up in general, most stocks are going up and the stock picker looks good. If the market is going down, most stocks are going down, and the stock picker looks bad but no worse than the rest of the market. So as long as a guru can come close to matching market performance, he can retain a customer. The worst thing a guru can do is lose money when the overall market is going up, which will put him out of business in a hurry.

The best thing to do is educate yourself. There are various outlets that will teach you how to trade. The one I'm most familiar with is Investools. If a "Get Motivated" seminar is being held anywhere near where you live, attend it. Investools is a presenter there, and offers website access with training for $100 for six months. That is a great start. Investools is the education division of T D Ameritrade, so they are not a fly by night operation.

I'll also offer one last bit of advice. These stock gurus are often sending out teaser advertisements through email. They always sound like the stock is the sure next big thing, but you have to sign up to find out the name of the stock. When I received these teasers, on occasion I would do my best to research the information provided (which is often distorted just enough to throw you off) and determine what company fit the profile. I later found www.stockgumshoe.com - a website that the owner sleuths out these teasers and offers his opinion. He also tracks the performance of the stocks that have been teased, so you can see how well some of the newsletter picks have performed. The performance is mixed, which shows you shouldn't be relying on someone else to pick your stocks for you. Still, it is worth reading, and occasionally has provided me with some stocks to add to my watchlist.