How to Avoid Slimy Stock Traders

May 31, 2009

by W. Alan Gay

I’ve had the opportunity to meet a lot of different stock trading experts during my fifteen year career as a stock trader. Most are great, but as with any profession, there are those that really give it a bad name. Unfortunately, they are the ones that can burn a new investor and turn them off from a fantastic pursuit for life. In the hopes of warning you away for some of the slime before you go through what I did, here are a few of my experiences, and a couple suggestions for avoiding the encounters yourself.

I established a core business value through the worst experience of my life with the ultimate in slimy stock traders. The encounter changed my life as I realized that some people are just in it for themselves, no matter if other people are hurt along the way. I learned I cannot be like that, and throughout my life if a business deal required me to hurt someone else I said no thanks and passed it up.

It was a stock trading service that provided the subscriber list a group of recommended stocks to buy or sell short every day. Like many other services of this nature, they provided lots of facts and figures to confirm that their recommendations performed as predicted a large percentage of the time. I was impressed by their presentation and signed up right away.

If you are dealing with a reputable stock trading service, it can be a great way to find profitable stocks on a consistent basis. But, unlike those credible services, this had a different goal that I was not aware of at the start. Turns out, the key management personnel of the service were recommending stocks to their subscriber group for the sole purpose of controlling the prices for their own gain.

Here is an example to explain what I mean. The owners of the stock trading service would first buy a stock such as IBM through their account. They would then recommend to the entire 3000 + subscriber group that everyone should buy IBM stock. The subscriber group would start making these purchases, which would drive up the price of IBM stock. Once the slime was satisfied with their profit, they would cash in the stock they had originally purchased.

It was a blow to realize that the stock trading service I had placed my faith in was using us subscribers to front run their own trades. They could care less about the success of their subscribers as they had led us to believe, but only their own profit. And, on top of all that, we were paying the slime subscription fees to do it! I just couldn’t believe it.

I must admit, most stock services do not subscribe to that slimy form of business. However, less offensive, but more prevalent are those services that convince the new trader that stock trading is way to risky to go it alone. But if you sign on for their monthly program (at a hefty fee, I might add), they will do all the work for you.

True, stock trading is complicated at first, until you have found a system that is right for you. But anyone who tells you that you can never learn enough to handle it yourself at some point, is just trying to milk you for the monthly fees. These systems are typically pretty generic and don’t take into consideration your personal risk tolerance or trading preferences.

There will always be some investors out there that don’t want to trade on their own, and for these folks the monthly stock trading service might be the way to go. They will receive solid trade recommendations that are right some of the time. The return is usually tolerable, but I have found that if you can find a system that works for you and your risk level, you will realize higher returns in the long run and a more satisfying experience.

It does take some upfront legwork to find someone to help you learn the ropes without taking control over from you. But there are plenty out there and you will be pleased with the result as they will take the slime out of the profession and help you help yourself become proficient at stock trading. I guarantee, you will enjoy the results for many years to come.

About the Author:

W. Alan Gay has been a stock trader and coach for fifteen years. His white paper describes Alan’s voyage to becoming successful at trading stocks and gives useful tips he and his students have used to consistently trade profitably. Click to obtain a free copy of his report and learn more about how you could be trading stocks profitably in as little as two weeks.