During the Swingers, Scalpers, Holders panel discussion I did with Currensee a little while back, a question on trader development came in which we didn’t have time to address within the allotted time. It is worth a blog post, though, so let me address it here.
The question was:
As a beginner, is a subscription to alerts from anywhere needed to compliment the learning process or improve profit generation?
I would not call them “needed”, but subscription services can certainly be very useful tools in a developing trader’s growth and education, if they are chosen well.
What I definitely do not suggest is that any new (or relatively new) trader just subscribes to some service which is supposed to produce good trading results. That is basically the same as buying a trading system at a stage too early in one’s development to know what is required. You need to have a firm grasp on how you will be approaching the markets before starting to look at these sorts of things.
To expand on that, you need to find a signal service which matches how you would trade the market yourself. That means if you are going to employ technical analysis, the service should be focused on technical analysis. If you are going to be a swing trader, the service should not be focused on day trading strategies. If you only want one signal a day, the service shouldn’t be producing ten. Notice how this decision-making process requires that you have a very good handle on where you intend to take your trading, something which demands a fair amount of thought and consideration in an of itself.
Now, having said all that, there is value to following a service which teaches you a new approach. You still need to make sure it fits which your overall way of trading, but it’s totally fine to follow someone who employs volatility analysis, for example, when that is something you want to understand better. Similarly, it’s totally reasonable to follow an options trading service if you are looking to expand your trading in that direction.
If education is your intention, then make sure you pick a service which explains well the thought process and rationale for each trade idea. You won’t learn anything if you’re just being told buy here/sell there with no justifications for doing so. Once you are well-versed and comfortable with the methodology employed, then a pure buy/sell signal provider will likely be just fine. As you are developing, though, it won’t do you much good, just like using a black box trading system.
So the bottom line is that while I wouldn’t suggest a signal service for some one still figuring out what trading is all about and still in the early stages of searching for their niche, I do think it can be something useful in furthering one’s knowledge and expertise a little bit deeper into their development.
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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
** See John’s full bio.
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