Stock Alert Services – Are Stock Alerts the Answer to Your Trading Dreams?
Stock alert services seem to be the go-to for new traders looking to enter the trading world. I subscribed to a handful of them myself when I first started. Thinking back, it’s hard to believe just how naive and unprepared I was for achieving market success.
In theory, alert services seem great. While doing some online research on how to make money in the stock market, you stumble upon a trading guru boasting about explosive profits. You check out their track record and it seems incredible – $5K, $10K, and even $20K+ gains on individual trades executed within just a day or two. How life-changing would results like that be for you? The good news is that this guru offers his own alert service, so all you have to do is copy his exact trades in order to achieve the same results.
It makes you think: how hard can it be to receive buy and sell alerts to my phone or computer, and then instantly make those exact same trades? You simply receive the text/email alerts that include entries and exits, and literally just copy them. No prior experience or skills necessary. Heck, you don’t even need to be sitting in front of a screen monitoring the market for opportunities throughout the day. You’ll have the freedom to do whatever you want while making an incredible side income trading stocks.
Spoon-fed winning trades are only a small subscription fee away, at least in comparison to the explosive profits you’re soon to be capturing like clockwork. Sign me up immediately! But not so fast – achieving consistent trading success isn’t quite so easy.
Why Stock Alert Services Simply Don’t Work For Most Subscribers:
What most new traders don’t quite understand are how these stock alert services can create artificial price spikes and drops within mere minutes or hours. But it’s simple supply and demand. It’s essentially a pump-and-dump. Most alert services focus on trading low-priced, small market cap stocks with limited liquidity. So when the guru enters his position and sends out the buy alert to thousands of followers, it can cause a drastic short-term increase in price. As his followers continue to receive the alert in waves and blindly copy the trade, it only continues to drive the price of the stock up. Everybody is frantically trying to pile in as fast as possible.
The problem is that virtually nobody can get the same entry price as the guru. Because once the buy alert is sent out, massive levels of buying from thousands of followers all at once drives the price up. Every minute or two, new groups of subscribers are only just seeing the alert, but still piling in. After several minutes, the stock can already be up 10-20%+ from the guru’s initial entry, yet more subscribers might still decide to chase it – with an entry price well above that of the guru. Eventually, it all has to come to an end: the guru exits his position for a huge profit, sends out his sell alert, and a massive drop ensues. He can then brag about his “25% profit in 3 minutes” while many followers actually experience massive losses. This is the unfortunate reality of stock alert services.
Going into it, inexperienced traders think they’ve found some exclusive secret or shortcut to trading success. But what they quickly tend to realize is that blindly chasing alerts is not only an ineffective approach, but a highly dangerous one.
How Stock Alert Services Can Improve to Actually Help Their Subscribers:
When it comes to stock alert services, they tend to come in two forms. The first is a pure stock alert service that offers nothing more than alerts – these types of services should be avoided at all costs. The second is a stock education service that offers alerts in addition to many other resources like video lessons, webinars, courses, watch lists, and chat rooms – these types of services can potentially be valuable to your progress as a trader. None of them are all good or all bad, but a lot depends on how you choose to use them.
Unfortunately, most people who join stock trading programs at Investors Underground, Warrior Trading, RagingBull, Profit.ly, or anywhere else tend to gravitate toward alerts. A considerable percentage of subscribers will completely overlook the educational resources offered and opt to blindly follow alerts. I’ve never heard of a situation where this copy-cat approach ended well long-term. So I think many trading services can do more to educate and protect their subscribers when it comes to alerts.
- CAP THE NUMBER OF ALERT SERVICE SUBSCRIBERS
- CREATE A GATED STRUCTURE THAT REQUIRES EDUCATION BEFORE GAINING ACCESS TO ALERTS
A couple ideas would be to put a cap on the number of alert service subscribers, but even more importantly, create a gated structure that requires subscribers to watch video lessons, go through courses, and pass tests covering concepts like position sizing, risk management, and mental execution before being granted access to alerts. Realistically, I don’t see the first one happening since it would drastically limit the revenue for these services, but setting up gated structures would probably be worth looking into.
Generally speaking, if a service is more concerned about your personal development than bragging about their own alerts and profits, then you’re probably in a safer place. There are some people that complain when services don’t send alerts, but I personally see it as more of an advantage than disadvantage. You might think you want the easy path of simply copying alerts, but it actually ends up being the harder, longer, and more expensive path for countless traders – both emotionally and financially.
Conclusion – What is the Best Stock Alert Service?
There is no “best” alert service in the typical sense of the word. In my experience, alert services all tend to hurt more subscribers than they help. Because alerts alone handicap new traders from gaining the experience and skills required to become completely self-sufficient, consistently profitable traders. If you actually want to achieve success, you can’t cheat the process with an alert service.
There are some trading education services that I would recommend, but any sort of alerts aspect I would suggest ignoring. It will most likely only hinder your growth. If subscribers on the whole didn’t abuse alerts by blindly piling into them – and just used them for the purposes of transparency and studying – then they would be highly beneficial. This would allow you to: 1) see that the guru’s methods actually worked without the distortion of thousands of followers piling in behind him on every trade, and 2) actually be able to study the guru’s entries and exits, try to understand what he was seeing, and why he executed the trade the way he did.
Unfortunately, this just isn’t realistic. There will always be individuals looking for shortcuts or a way to cheat cause-and-effect. But you simply can’t achieve consistent day trading or swing trading success with alert services. Consistent success can only come from learning, developing statistical edges, and executing on those edges with discipline. Chasing alerts is for amateurs. Sadly, I’ve done it – and so have thousands of others. But it just doesn’t work. You might get lucky on a trade or two that you blindly followed, but in the end blindly mirroring will always come back to bite you. No legitimate trader relies on following somebody else’s alerts.
At the core, becoming a consistently profitable trader is about self-sufficiency. Dependency will only lead to aggravation and blame.
Written by Matt Thomas (@MattThomasTP)