A trade alert service or chat room is a (often fee-based) service offering to notify traders of potential trades that a subscriber may choose to follow and execute. Notifications come via email, text, chat rooms or some other proprietary platform that the service selects.
We used to offer a “trade ideas” feed for years (more on this further down the page).
However they are delivered, trade alert services offer a developing trader a chance to see trades.
When you’re just starting out, it is extremely helpful to see trades. You can get a sense for pace and timing. You can see trade management, and sometimes a glimpse into the mind of the trader you are following. You can also see the multitude of ways that a trader can pull money out of markets.
While there are several positives to trade alert services, at the same time, there are also some dangers to be on the lookout for. So, If you’re currently signed up for a trade alert service, or considering subscribing to one, let the following be a guide to maximize the development opportunity offered by a trade alert service:
- Be an objective observer. When you subscribe to a service don’t just start putting live money on the line. Take some time and paper trade the alerts. Take notes. Notice time of day, tempo, number of trades. Notice whether alerts come before the trade is filled or after the trade is taken (This can be a hint for whether you are following a more impulsive or methodical trader). Try to get a sense of the risk-to-capital ratio employed. Remain objective and you’ll reap more value from the service.
- Remember that they are not a holy grail. We often see new traders seeking trade alerts as the end to their trading woes. It goes something like this, “If I can just find the right person to follow, I will never lose again.” Remember, there is no holy grail in trading. If there was, you can bet no one would sell it for cheap. There is no perfect system. You will incur losses. A trade alert service will not alleviate you of the need to develop the mental resilience to do the right thing when the trade goes against you. So, if you keep in mind there is no holy grail, you’ll do better.
- A trade alert does not equal mentorship. Following a trade alert service and thinking this is the same as mentorship is akin to thinking that watching sportscenter baseball highlights will make you a proficient major league batter. Sure, you can see pitches and you can watch guys take swings, but you are not in the box taking cuts and picking which pitches to swing at. After you strikeout, you also don’t have a hitting coach pulling you aside to review what went wrong and how to approach the plate the next time. To continue the baseball metaphor, imagine a service that is built for a Mark McGwire (powerful home run hitter), but you are an Ozzie Smith (consistent base hitter without the power to hit the home run). You will likely not be successful in this scenario. You need a system that is built for you so that you can approach the plate confidently to pick you own pitches to swing at based on the type of trader you should be. Trade alert services are not designed for this. If you go in with this understanding, you will be able to get more out of it. Use this awareness to decide what type of trader you want to be.
- You are responsible for trades you take. If you subscribe to a service and decide to take trades that are suggested, remember that you are still responsible for the results. If you make a profit, it’s on you. If you take a loss….it’s still on you. Even if the service can show high percentage win rates, you are the one placing the trade, deciding how much of your capital to risk and how much heat to manage. We’ve seen so many traders risk too much of their accounts blindly following someone else’s trades, only to blow up their account. If you get burnt, it’s likely because you got too leveraged and didn’t manage your risk. You have to know how much you are willing to risk. If you can’t handle the heat, take the trade off. You entered the trade, you exit the trade. You took the trade. Remember you are responsible and you’ll save yourself much psychological angst if things start spinning out of control.
- Codependency is not the objective, freedom is. If your goal is to become an independent and competent trader, be mindful that you can build too much reliance on the service and a lack of responsibility on your part as the individual trader. So, even if you find a service that works for you, continue to work on developing your own independent skills.
So, there you have it. Our guide to maximizing the development opportunity offered by a trade alert service.
Finally, while we’ve outlined some ways to get great value from a trade service. Don’t expect to see a trade alert service from us ever again. As mentioned earlier, we offered a service like this for many years. It’s great for our business in terms of recurring revenue, but it often fails to help traders achieve what they are really after…..confident competence and freedom. Over and over again we found that traders develop better when they can have one-on-one attention and coaching. It vastly accelerates the development. It reduces dependency on us and the market gains another competent, independent participant.