Why Do Professional Traders Sell Stock Picking Services?

It’s not uncommon to think “why the hell are you selling a swing trading stock picking service if you know how to pick stocks?”

“If you really knew how to swing trade stocks, why wouldn’t you just pick them and start rolling in the cash! You must be a fraud!” The logic is solid and can’t be argued against. HOWEVER, there is one factor that people seem to forget about with this argument.

MORE MONEY!!!!!

They aren’t giving out their stock picks to do you or the world a kindness. They are doing it TO MAKE MORE MONEY! It’s as simple as that. This doesn’t mean their picks are worthless; it just means they are looking to add an additional revenue stream to their income.

Everybody is out to make more money and stock traders are no different. More revenue streams > less revenue streams. That’s the way of the world. That said, a stock trader — whose only goal is to turn money into more money — well, he quickly sees the possibilities in selling you his picks! It’s like his own personal piggy bank (as long as the picks are good of course).

Think of it this way…. If you could perform your normal job duties day in and day out and make money as usual WHILE AT THE SAME TIME having others pay YOU to tell them what you’re doing — would you do it?

A better question… why the hell would you NOT DO THAT!!!!

You were already doing what it is you do to make money, now you are just telling other people what you are doing and getting PAID FOR IT. It’s a cash machine and all you have to do is pull the lever.

The Beauty Of Stock Picking Services (From Their Side)

There’s no real risk. As long as the service doesn’t explicitly recommend buy/sell recommendations on the stocks in the watch list, they are golden. Some do that and they are STILL golden due to careful disclaimers.

Most services merely post watch lists and the head guy will point out his trades when he makes them. You’ll get an alert telling you what he did. It WILL NOT SAY to buy or sell. It’ll just tell you what happened.

The true beauty of this is he’s not telling you to buy or sell. He’s just telling you what he’s doing. What you decide to do is on you because he’s not giving you investment advice in any way.

If you decide to follow him, well, that was your decision. No one told you to do that, now did they?

If you lose money on the trade, that’s 100% on you; and he’ll explain “you are in control of your own trades” because he doesn’t give buy/sell recommendations. On the other hand, if you make a profit on the trade, that whole “you’re in control” spiel goes out the window and he made another great pick!

It works like this…

  • He may win and you may lose, it’s not his fault you lost.
  • You may win and he definitely wins, he made a great pick as usual and that’s why you’re a member!
  • He loses and you lose even bigger (because you’ll enter after him), losers happen and no one can win them all. Cut your losses, don’t dwell on them, move on to the next winner.

That last part brings him closer to his members rather than further apart. It sounds odd, but it’s true and I’ve witnessed it countless times. Because even he — the stock picking MASTER with ungodly powers — can lose just like normal people.

The members of the service don’t realize that even when he loses a pick, he still wins. Everyone is still paying him in monthly subscriptions regardless of his losers because the service has reached “critical mass”.

The Horror Of Stock Picking Services (From Your Side)

There comes a time when a stock picking service reaches what I like to call “critical mass”. A time in which there are so many members who mirror trades by the leader that each and every pick is a surefire winner; and any losers (which are beyond rare at this point) are just a blip that will be forgotten about as soon as the messiah picks the next winner.

How can a stock be a surefire winner? Well, it’s simple. There are so many people following the leader that any time he makes a new trade and the alert goes out, hundreds of people follow suit. We’re talking about tens of thousands and hundreds of thousands of dollars here. That is enough to produce some serious moves on a stock chart.

Considering most of these leaders do not stay long in these trades (normally 1 to 3 days), the leader can simply ride the wave of buying that follows and then get out on any sign of weakness. From the look of it, he made the perfect trade and I’m sure many of this follows profited as well. The majority of mirror traders, however, did not.

beast

I have been witness to this many, many times in over half a dozen stock picking newsletters. The guru will show his entry point on a chart, and not 5-10 minutes later, the stock will rocket up a good way. If you’re not familiar with the process, it seems like he has a crystal ball and knows exactly when it’s about to go boom.

In reality, it’s just his followers getting the alert and mirroring the trade. This isn’t always the case but it is for the majority of these set-ups. Buying attracts buying. And this avalanche of buying will attract more traders like flies to a poop wagon.

The first dozen or so times I saw this, I would simply think the man has a gift for picking stocks about to run. But, several dozen times more over the course of the year and you begin noticing the same story play out again and again and again. Eventually, you smell that fly covered poop wagon for what it is…. a fly covered poop wagon!

Are They All Scams?

No, of course not. I think many stock picking services started out just as I described at the beginning of this post. The leader simply traded stocks as normal and tried to open a new revenue stream by giving his/her excellent picks to other interested traders.

They hit the nail direct on the head a few times and the service eventually grew in popularity by leaps and bounds, becoming a monster that feeds itself with it’s own picks. It’s no longer about the picks themselves, but about the messiah and his gift for seeing opportunities.

He can do no wrong and all doubters are just jealous of his stock prowess and wish they had the messiah’s incredibly gifts.

Don’t get me wrong, creating a stock picking service of this magnitude is no easy feat. It’s damn impressive and took a lot of hard work. However, that doesn’t change what these services have evolved into; an at-the-ready cash machine for the leader.

Should You Avoid Swing Trade Stock Picking Services Altogether?

Not necessarily. Many of them are excellent learning environments (if they focus on teaching as well as giving out picks). Plus, it’s always nice to be surrounded by like minded people sharing profitable trade ideas. You just need to know how to use these to your advantage and pull away from the idea of mirroring the leaders of these services.

If you know what you’re doing and have a good grasp of technical analysis, mirroring can be profitable; if you are hyper aware of all trader alerts and can get in before EVERYBODY ELSE. However, mirror trading is the worst thing you can do if you are new to trading swing stocks.

It’s one of the quickest ways of losing huge chunks of your account in the blink of an eye. Believe me when I say to avoid it at all costs. I lost thousands because of my fervent desire to trade with the “leaders” of these groups.

How to Best Take Advantage of Swing Trading Stock Picking Services

I’ve made another post covering this topic in more detail, because quite frankly this post has gone on a bit too long already, haha. The post is essentially about using the service’s watch lists, their lessons, and finding gems among the crowd.

For instance, with one stock picking service I joined a few months back, the absolute best swing trade set-ups were from a paying member of the service. Not a mod, not the head guy, just a paying member like me. His unique scan found hidden gems that mine did not based on his custom scan settings. I regret to this day not getting this member’s contact information.

Do I Offer A Swing Trade Stock Picking Service?

At the moment, no. The site is primarily about learning and becoming a better swing trader on your own and NOT relying on others to make trades for you. I can’t stress the importance of that!