Stock trading newsletters plague the internet.
Anyone who has a hint of trading experience wants to sell you their stock picks.
Any why not?
It is easy to set up a website, collect your money via PayPal, and send you an email when it is time to make a trade.
If they make you money, great!
If not, oops...
Once they lose enough, they shut it down, and start it back up with a new name and website.
If I had a dollar for every website that promoted getting rich quick, I would be rich.
Trading newsletters are not all bad. In fact, many of them can be quite profitable for you. When selecting the best newsletter for you to follow you need to know what to look for and how to spot the fakes.
What Is A Trading Newsletter
Trading newsletters, trading services, and alert services have different names, but all mean the same thing. A trading newsletter will typically require a monthly or annual fee for access to their trades. They will either email or send you a text when they place a new trade alerting you to do the same.
The idea is that you will follow their trades and profit as they do. Each newsletter offers a different strategy to trade and various perks to buy. Option newsletters are popular because you always remain in control of your portfolio. You are not required to turn over your money as if you were signing up with an investment advisor or hedge fund. You will still maintain your brokerage account and you can choose when to start or stop trading.
The Best Reasons To Join An Options Newsletter
Trading is the loneliest sport of them all.
If you are lucky enough to be a successful trader, you will find yourself alone at your desk most days. Traders don’t venture out into the sun on most days. Monday through Friday, you will be glued to your desk, watching your four monitors, and waiting for the next uptick in price.
Very few traders trade for a firm. Proprietary trading firms are still present and can offer a solution to trading with someone else. A proprietary trading firm is a company that trades its capital for profit. Typically, they will “employee” you as a trader and either take a cut of your profits or charge you a “seat charge” to rent out a desk.
Unfortunately, Cory Mitchell of The Balance notes, “Many firms have moved on online because it is cheaper than having a brick and mortar business. This, unfortunately, means you are no longer surrounded by other successful traders when you start out. Chat rooms and Skype are useful tools, but not as effective as having other successful traders there, in person, to answer your questions.”
Most newsletter services are going to offer some type of chatroom. This is a great way to deliver trade alerts in real-time and keep a sense of community flowing throughout the day. Chatrooms are not only good for trade alerts but if there are enough moderators in the chatroom, it can be a great place to get questions answered.
Kunal Desai from BullsonWallStreet runs a day trading service and has done an excellent job of curating a healthy culture in his chatroom. Not only is he available in the chatroom to dish out trades and answer questions but has a team of moderators to help pick up any slack.
When you have a question, who are you going to go to?
It is always best to have a mentor as you journey through options trading. Mentors are there to let you learn from their mistakes, saving you lots of money in the long run. But more importantly, a mentor is there to answer your questions as the arise.
If you are lucky enough to have found a mentor to work with you, you are ahead of the pack. It can be difficult if not impossible to find someone to take time out of their day to work with you and give you advice. This is especially true if you don’t want to pay someone.
If you cannot find a mentor, the head trader of a newsletter is your next best bet. Being a part of the newsletter will typically give you access to ask questions. It is best to find a trader who is quick to offer help and answer questions.
The idea is not to be a slave to the option newsletter. You want to profit with the trades, but you need to be able to continue to trade if the newsletter ceases to exist. At any moment, the newsletter could close shop, and where would you be then?
Some newsletters will offer learning materials, not just trades. It is best to take advantage of any learning material provided. This is when you also want to take advantage of asking a lot of questions. Most traders would be happy to share their strategy and help you navigate handling trades. Use every aspect of the option newsletter, don’t stop at just the trades.
Having a mentor, community, sound board, learning source is excellent but the main reason you should join an options newsletter is for the PROFITS.
Hopefully, the newsletter you have joined has a reputation for making money, and you’ve entered to grow your portfolio. Otherwise, what are we even doing this for?
There are a lot of different options strategies out there. Each one has its benefits. You should understand the strategy you are participating in and be comfortable with the level of risk and reward offered.
What To Watch Out For In An Option Newsletter
With the rise of the internet, we have also seen the rise of the “guru.”
Anyone with the ability to create a website can pass themselves off as a guru. The market is flooded with newsletter services offering you the ability to get rich, and get rich quick!
This is when following an alert service becomes tricky because you must put your hard-earned money on the line and trust someone you’ve never met.
You must trust that they will take care of you not only in the good times but in the rough times.
The Lazy Trader has summed up the “illusion of the guru” perfectly. Here is an excerpt, “The guru will tend to be a thin-skinned guy. He will unmercifully counter-attack when you question his trading decisions. He will rarely ever allow you to freely post comments on his site. He will censor you. He will be quick to block you on Twitter at the first slightly uncomfortable question. Nothing can disturb his Vedette status.
If the guru shows a track record and he has a losing period, he will have a serious tendency to delay posting the results for weeks. Even three or four months are not uncommon. He may eventually remove the track record all together, slowly morphing into a Furu (Fake-Guru).
The Guru turns into a Furu by re-inventing himself when things go wrong, which they will. He stops responding to emails from frustrated subscribers who lost their respective arrières. Shutting down his site and starting a new one is a simple as farting. He can easily accomplish the move and have a new shot thanks to his previously protected anonymity.”
It is not just about spotting the fake guru that poses the challenge, but also the phony newsletter. The low-barrier to market for newsletters brings out a lot of overnighters.
These are the newsletters that pop up overnight, have a small track record (if any at all), and want to collect your membership fees.
Be wary of any newsletter promoting returns in the 300%, 400%, or 500%. Performances like this are not practical and do not happen often. These newsletters use this one off high gainer as marketing bait.
"Double your portfolio every year!"
We’ve all seen the Facebook ads and sales pages promising your riches for little to no work on your part.
These newsletters will often come up short. You will find the trades to be mediocre at best, have no risk management plan and rely on the ever-popular “hopium.”
Once these guys lose your money, they are off to the next victim.
The business of option trading newsletters is unregulated. Newsletters do not fall under investment advisory services, and these “gurus” are not investment advisors. Trusting the wrong newsletter could leave you penniless without recourse.
How To Pick The Best Options Trading Newsletter
Don’t let a few bad apples ruin the whole bunch.
If you are diligent in your option newsletter selection, you can have a profitable portfolio for years. A successful trade alert service can provide you with actionable trade alerts and stock picks. Even if you cannot trade every single alert that a newsletter releases, it is a great time-saver to have someone else pour through the charts, pick the strikes, expiration, and write up an explanation as to why they are making the trade.
Besides saving you time, having a knowledgeable trader is invaluable. In the loneliest sport in the world, everyone needs a sounding board. Having your go-to expert trader will come in handy when you are looking for your next trade or get caught in a position you placed and need a way out.
Before you pull out your credit card and hit “Sign Up” send them an email. Ask them a question about a trade you have on, ask them a question about a trade you want to place, but don’t ask them a question about the service. It is easy for a trading company to answer a question about their service. Of course, they want to answer, that is a sale in the making.
If you ask them a question that is not related to their service, they may be more reluctant to answer. Don’t send your hard-earned money to someone who can’t take a second to answer your email and help you out.
When you are vetting your next trading alert service, make sure you look through their past performance. The longer their past performance, the better. Not only does that show they’ve been around for a long time but they’ve been able to adapt to several market conditions.
As you are going through their past performance look for the losers. Everyone has losers, even with a 98% win-rate, we have a small handful of losing trades. Losing trades are not the end but make sure the loses are reasonable. If they are not reasonable or you want to know what happened, ask them.
Jeremy Blossom from Investing Shortcuts recommends that you should only be a part of an alert service if you are familiar with the types of stocks they trade on and the type of analysis they use. While it is good to branch out past your own experiences, you don’t want to be in a system you don’t understand.
One of the last things you should check for is a trial or guarantee. Most option newsletters will over a 14-day free trial or 30-day money back guarantee. Even though these are standard, it does show a confidence in their system. If a trader doesn’t think you would stay past the trial or guarantee, they won't offer it. They are there to make money on the initial sale and that is it.
There is a lot of money to be made by following an options newsletter. If you take the right steps, question everything, and be diligent, you can find some real gems and some real money makers.
On top of adding to your portfolio size, option alert services are a great time-saver. There are only 6,000 different stocks, ETFs, and indexes to trade. Having someone else do the work for you is priceless.
With options that work load expands even more. Not only do you have to find the stock to make the trade on but you must find the right strategy, expiration, and strike prices to be profitable.
Unfortunately, with the low-barrier to entry, the market is flooded with fake gurus trying to promise fame and fortune. Don’t let these traders get the best of you. Do your homework, ask them questions, study their past performance, and make sure they have a guarantee or trial.
Once you are ready to take the plunge, start slow. Take the trades with a smaller size than you would typically trade. Don’t take every position, only make the ones you understand. Once you get a feel for how the strategy works you can start to increase your overall size.
Which option newsletters do you recommend? Let us know in the comments...