The Dangers of Blindly Copying:
Mirroring. Copying. Piggybacking. These terms are synonymous and have far too significant of a presence in the stock trading world. I hate to say it, but it seems like the majority of beginners looking to enter the stock market don’t care about education or becoming self-sufficient. All they want is some expert to send them alerts that they can subsequently take action on. And I don’t want to make light of how dangerous this practice can be. There’s much more to trading than simply receiving “Buy” alerts. Without an understanding of stop losses, risk/reward ratios, portfolio allocation, and other trading concepts, you can sabotage your portfolio rather quickly.
As I alluded to in the previous paragraph, if you’re going to copy anything from another trader, it should be pieces of their strategy or mindset – not specific trades. Let’s say for example that some guru buys XYZ stock at $5.00 and then alerts it to you. By the time you receive the alert, the stock might be trading at $5.50, so that’s where you enter (already 10% higher than the guru entered). At this point, they might be ready to exit for a nice profit by the time you’re ready to buy. The upward move could potentially be over at this point. If you don’t understand the importance of support & resistance, trend lines, volume, and other concepts (key word = concepts), then you risk jumping into trades at less than ideal times. Not to mention the possibility that you may not understand how to calculate risk vs. reward, how much of your portfolio you should put into the trade, when the right time to exit is, etc. Taking all of this into consideration, it’s clear that blindly mirroring can be a disastrous experience.
In the end, it’s critical for you to have the knowledge and know-how to manage your own trades. Nobody else is responsible for your own portfolio besides you. You’ll thank yourself later when you hear other individuals complain and blame others for negative hits to their brokerage accounts. You don’t have to be that person. Take ownership of your portfolio by studying and ultimately becoming a consistently profitable, self-sufficient trader.
Related Post: What Should New Traders Be Focused on More Than Anything Else?
Yes I admit it, I was one of those people who would hunt around for stockbroking tips and then action whatever buy/ sell recommendation that the “guru” was saying. I told myself that if the company was credible, then the trades must be “OK”. I went on to lose $15,000 doing this method before I finally came to my senses. It would have helped if I had something like this to guide me and help me make better decisions. Sign me up!
You’re not the only one who lost money trying to follow buy alerts on stocks from self-proclaimed “gurus”. A lot of people have gone down the same path. Even I started off a few years ago thinking that might work. But the reality is that there’s so much more to trading than just buy alerts. Receiving a message via text or email that “You Should Buy XYZ Stock Now Before it Explodes” doesn’t cover the mechanics of the trade that are critical to success, such as position sizing, managing risk, and deciding when to exit. Overall, choosing the “right” ticker is only part of the process. The best traders are prepared, educated, and self-sufficient.