Way back before I started this stock picking service and before I did all those years of quantitative research, I once was a subscriber of other stocking picking and trade alert services.
I learned some valuable things from being subscribed to those services, but I also found there to be lots of problems. Those problems actually played a huge role in the decisions I ultimately made about what types of trades I wanted to do and in turn what type of stock picking service I wanted to create. I specifically wanted to address those problems.
Just to clarify, these problems are just with the services I tried. These aren't generalizations about all stock picking or trade alert services. And I'm only speaking to problems that I personally had with them. Others may have really enjoyed those services and even liked some of the specific aspects that I found to be problematic.
Here are the problems I had with other stock picking and trade alert services and how I solve them with Mindful Trader:
A lot of the trade alert services I joined were for day trades. By this I mean that the trades they alerted were trades that lasted minutes or hours (as opposed to days).
A problem with day trade alert services is that the alerts are very time sensitive. It's like you have to be chained to your desk ready and waiting so that you can pounce on the alert. There were times where I was just one or two minutes late to respond to the alert, and I missed the trade opportunity!
It takes a whole lot of time and effort to follow day trade alerts, and for me there was always this sense of anxiousness about being ready for the next alert since I knew I would have to be so fast to respond.
That experience helped me realize that I strongly prefer swing trades because I wanted more flexibility with my time. It's also why I think swing trades are great for a stock picking service: because you don't have to be chained to your computer in order to take advantage of the stock picks. I did a study showing that a subscriber might get just as much benefit as me if there is a noticeable delay between the time they follow a stock pick and the time the stock pick is posted.
With a lot of stock picking or alert services, the notification I got about entering a trade didn't have any information about what my basis should be for exiting the trade. Most services would send a separate notification later when it was time to exit.
I always felt very uncertain about whether I would be available to respond to the "exit" alert in a timely fashion. It was no biggie if I were to miss a trade "entry" alert because I could just skip that trade altogether and take the next trade. But once I had real money locked into a trade, I wanted to be sure I didn't miss the exit alert and so I was often on pins and needles waiting for the alert.
Stressful!
At least one service sometimes didn't alert me right when they exited, and I was left holding the stock without even realizing the trade should have already been over...
With Mindful Trader, I tell you the exact exits I'm setting up right from the start when I post my stock picks. I set all my orders up at the start of the trade, and I never touch them again. Easy peasy! No wondering, no doubts, no stress.
I had subscribed to a couple penny stock trade alert services. There is a major and fundamental problem with doing trade alerts on penny stocks or micro cap stocks:
They don't have enough liquidity to support a trade alert service.
What does this mean? It means that since they are such small companies, there are not a lot of people trading them.
This poses an issue because once the alert goes out, if a bunch of people rush in to buy a stock like that at once, then suddenly the price explodes. There aren't enough sellers to absorb all the buyers, so the price shoots up.
Why is that a problem? Because when I was following these trade alerts, by the time I got to my desk to make the trade, very often the price had already skyrocketed due to so many other subscribers having already also bought the stock on these micro companies. I was buying "high".
And then to compound things, the guy who alerted the trade would then sell his position. Guess who he was selling to? You guessed it: subscribers like me! And once he sold his position, a tidal wave of sell orders would come in from all his subscribers, and the price would rocket right back down.
And in the end, I was left holding the bag (along with many other subscribers I'm sure). The price had gone way down and I was still holding the stock at a loss while the "trade guru" had chalked up a profit and boasted this as another successful trade.
It was truly ridiculous.
I only trade the big boys at Mindful Trader. Stocks need to have a market capitalization of at least $10 billion for me to even consider trading them. Companies like Apple don't have their stock prices noticeably swayed by stock pick services. So they're perfect for Mindful Trader.
Combine that with the fact that I'm doing swing trades (where the profit target typically takes days, not minutes, to reach), and it's unlikely my stock picks will register much, if any, impact on the stock price.
One of my biggest problems with some of the trade alert services I tried is that they hadn't tested their trading strategies against historical data.
Most of the trading gurus just seemed to shoot from the hip on when to make trades.
I like the picture above. It's like a trade guru is just wildly looking around for things to shoot at (stocks to trade).
I certainly don't want to discount the fact that some people are very profitable based on using their trading intuition.
But for me personally, I like to know that for any given trading strategy, there are years of proof that this strategy worked over and over. And for the trade alert services I joined, they had never done any research about how their trading strategies could have held up historically.
This was a problem for me because different trading strategies are optimal for different market conditions. Some of these trade alert services might have periods of success, but can they hold up for the long term through various market conditions? Doing historical research is a great way to account for that, but these services hadn't done that.
Another reason I wished trade alert services had tested their trading strategies against historical price data is because I wasn't always convinced the trades being alerted were indeed profitable overall.
With one service, I ended up taking the time to log every trade I made. I documented the alerted price and my actual entry price, as well how late I was responding to the alert. The net result was that I took a loss on the trades despite typically taking just a minute or two to respond to the alerts.
Now admittedly it was a small sample size and not statistically significant, but man it's hard to hang in there with a trade alert service if I'm not only losing money but also if there is no sign that they've ever actually tested if their trading strategies work well throughout history.
That's why I back test every trading strategy I employ. If I didn't test it against historical data, I don't trade it.
I also try to be very transparent about how exactly my trading strategies performed in the past, how they are performing today, and what statistical measures I took to ensure a solid quantitative testing approach. You can see that all on this page:
So those are the types of problems I encountered when I tried out other stock picking and trade alert services. I'm actually thankful I had those problems because I think without them, I might not understand the true needs that customers of these services have. I tried hard to squarely address each of these items with the Mindful Trader service.
If you have questions or feedback, I'd love to hear from you!