Do Stock Alerts Work or Should You Completely Avoid All Stock Alert Services?
“Do stock alerts work?” is a question that almost every new and inexperienced trader has to ask themselves.
When I first started out, I thought stock alert services would be the answer to making insane profits in the market. After subscribing to a handful of them, however, I quickly found out that they weren’t nearly as effective as I initially thought they would be.
Not a single one helped me achieve any sort of consistent success. In fact, I can only remember a few occasions when following an alert actually resulted in me making a profitable trade. The vast majority ended up being losers (even though the gurus almost always won).
Looking back, I feel foolish for thinking stock alert services would make me a consistently profitable trader. But at the time, I just didn’t know any better. I didn’t recognize and accept the proper path to trading success – building core skills – until years later.
Hopefully this article helps traders understand the ugly truth about alert services and the main reasons why they should be avoided.
Why Stock Alert Services Are So Enticing and Popular, But Not Very Effective:
In theory, receiving stock alerts from a successful day trader sounds like a great idea. How can you lose if you just follow exactly what they do? But in practice, copying trades based on alerts isn’t quite as easy or effective as you might initially think.
Many trading services that send out real-time alerts try make it seem like you can capture the same explosive profits as them without much effort at all. You can have a full-time job or be busy during market hours, and still make a killing thanks to their trade alerts.
But this couldn’t be further from the truth, especially when you’re competing with hundreds or even thousands of subscribers to that alert service trying to do the same exact thing. Good luck trying to get anywhere close to the same entries and exits as the leader.
Receiving an alert and then acting upon it just a minute or two too late can be the difference between profit and loss. If you don’t anticipate the buy and sell alerts or aren’t one of the first few to act on them, you’ll most likely be left in the dust.
Overall, stock alert services seem great at first because you think you’re paying a relatively small subscription fee compared to the massive profits you’ll be capturing from the alerts. But once you join, you realize it’s not possible to match the results of the leader.
A few of the alerts might actually work out in your favor, but that doesn’t necessarily translate to durable trading success.
How Stock Alert Services Can Distort Track Records and Generate Massive Followings:
The tricky part about alert services for new and inexperienced traders is the illusion of success they can display. But that success, for the most part, is reserved for the individuals running the services – not the subscribers attempting to copy them.
Most people immediately trust a trader that can present a great track record. But for individuals running alert services with thousands of blind followers, it’s actually quite easy to do so – whether the individuals running the services are good traders or not.
Just imagine that every time you entered into a stock position, thousands of traders subsequently piled into the same stock after you. That insane level of buying support would provide you with a ridiculous advantage, wouldn’t it? It would actually be hard to lose.
These alert services providers can then use their extremely high profits and win rates to advertise to the masses and bring in even more subscribers. With an increase in subscribers, the profits become even more distorted – and the cycle continues over-and-over.
So even after individuals come to their senses and unsubscribe to these alert services after realizing they won’t actually help them achieve durable success, they still tend to have massive followings of copy-cat traders keeping them afloat.
It’s extremely hard for the average person (without much trading experience) to understand how the track records of these services can be distorted and also have the self-restraint to avoid joining them when their marketing is so enticing.
Better Alternatives to Stock Alert Services For Achieving Sustained Market Success:
The thing about alert services on the whole is that they seem like an attractive shortcut. Instead of actually building competencies and skills, they allow you to blindly follow a self-proclaimed guru. But cutting corners to trading success never works.
What many so-called trading gurus want you to believe is that trading is easy. They advertise their “magical indicators” and “foolproof systems” just to sell their course, program, platform, or service – because people don’t typically buy into things that sound hard.
But the reality is that becoming a consistently profitable trader is challenging. In all likelihood, it will be one of the most difficult endeavors you’ll ever pursue. Because there is no “holy grail” – it requires numerous technical, analytical, and mental skills.
This is why I believe legitimate training programs like Thomas Kralow and 2ndSkies Trading are far better alternatives to any stock alert services out there. For sustained market success, you have to develop the necessary skills for self-sufficiency.
If you want long-lasting success, you have to treat trading like the skill-based, peak-performance endeavor that it is.
Conclusion – How Stock Alert Services Can Actually Be Helpful, But It’s Rare:
There are some ways in which stock alert services could greatly reduce the market distortion they cause. If, for example, they limited the number of subscribers they accepted, focused on highly-liquid tickers, and held positions longer than intraday.
But you’ll rarely, if ever, see a stock alert service that limits the number of subscribers they accept. Such services have no financial incentive to do so. They want as many followers and to collect as many subscription fees as possible.
It would also be less sketchy if stock alert services focused more on higher-priced tickers with massive liquidity so that a large influx of buy and sell orders all at once wouldn’t impact the price as much (which some alert services do focus on). But these types of plays tend to move slower and provide lower returns than small cap/low float/penny stocks (which can be easily manipulated).
There’s also an element of how you personally choose to use alert services that can add or take away from the effectiveness of them. If you choose to use them in order to cut corners and blindly follow, then prepare for failure. But if you choose to use them as opportunities to learn how to run scans, create watch lists, and develop trade plans of your own, then they can be beneficial.
Overall, I’m not a huge fan of alert services, especially ones that focus on intraday small cap/penny stock trading. Prospective traders should be careful not to rely on them. Durable market success requires more than receiving and copying buy/sell alerts.
Let me know what you think about stock alert services or your personal experiences with any stock alert services below.
Written by Matt Thomas (@MattThomasTP)
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