Profit.ly: lx21

Silver subscriber

Wouldn’t it be great if you could find a wildly successful stock trader and go along for the ride? Many of us have dreamed about of finding the stock trading genius who we could follow trade by trade… and get rich quick!

Despite my own success, I had long believed that I should diversify my strategies, augment my income, and broaden my trading skills by finding a good trader who I could follow. I have tried out various services and subscriptions over the years. I have always done my due diligence – researching their backgrounds and trading history as best I could.

Sadly, despite multiple attempts, I have always lost money trading someone else’s picks. My experience ranges from Tokyo Joe to programs that picked stocks based on mechanical systems. I have traded picks and lost money even while the stock picker made money. The lesson learned is that you can’t make money blindly trading someone else’s picks.

Why is this so hard to do?

There are probably multiple reasons, and surely they vary with each individual I’ve identified at least three reasons why I can’t profit off of someone else’s picks:

1. I almost always get worse fills than the stock picker. If a stock picker buys a stock at $2.00 and sells at $2.20, he made a nice 10% profit. If I attempt the same trade, I will typically get filled at $2.05 and $2.15 respectively. That would be less than 5% profit – half what the picker made.

2. I seem to miss getting executions on the really good trades, yet I always get executed on the bad trades. If a stock picker’s trade is a great trade, it will often move away from the entry price almost immediately, leaving me empty handed.

3. Inevitably I am away from my computer or distracted when the stock picker alerts his exit. Poor timing on exits will easily erode profits.

If I consistently underperform the stock picker, frequently miss out on the most profitable trades, and screw up on timing the exits, I will be doomed to breakeven at best.

I am a PennyStocking Silver subscriber. Overall I have LOST money when I blindly follow Tim’s picks. If I believe you can’t make money trading another trader’s picks, then what am I doing here?

Years of experience have taught me that the only way to make money is to make your own trades. Once you have a successful strategy, you must learn it inside out. You should internalize it to the point that it is part of you. You should know what to trade, when to trade, and how to trade. How can you make money if you do not know when to enter or exit? How will you have the guts to hold onto a great trade when it’s showing a loss if you don’t have conviction? How will you know when/if you should bail out?

If Tim buys a stock at $2.00 and it’s now at $2.07, should you buy it, or is he about to sell? If the trade is yours, you will know what to do. You won’t need Tim, or anyone else to help you.

I confess, I do follow Tim’s picks. The difference is that I don’t buy or sell because he sends out an alert. I buy or sell when I want to make the trade. To me, his alert is a reminder or a heads up to check out the stock. Maybe I was trading another stock and missed a great setup. If I get his alert and I see a desirable setup, I will trade it ONLY if it is a trade I would have taken even without his alert.

I never made money by foolishly buying or selling just because an alert popped up. But I have done quite well trading stocks and setups that he brought to my attention via a TIMalert. Learn how to make your own trades, and then you can be successful.

EXAMPLE:

October 14, 2010
11:00 (approx) – “TIMalert: shorted another 30k Evergreen Solar, Inc. (ESLR) at 1.15, now short 50k at 1.155, goal is still to cover around $1 today”

I was wrapped closely watching 5 or 6 other stocks. I already had an interest in ESLR, but I wasn’t paying attention to it at the time. I double checked ESLR due to his alert. I liked everything I saw. I placed an order to sell short 25,000 shares @ $1.15.

11:35 – “TIMalert: covered ESLR at 1.17, lost 1.5 cents/share, not breaking down, could still be big squeeze, no thanks, cut losses quickly, breakeven on the day given my winning position in DSTI”

I was once again ultra-busy with lots of stocks to watch. I quickly double checked ESLR and determined that I still wanted to hold it short.

12:45 – “TIMalert: reshorted 66k ESLR at 1.14, looks like i just needed patience, the crack is onnnn, goal is $1, but i’ll chicken out before then”

Once again double checked it. No change in my opinion.

1:26 – “TIMalert: all out of ESLR at 1.07ish into this panic selling, could go more, but I just made $3k so I’m taking it’

I had my own personal exit target. I could see his rational, but felt no need to alter my trade.

1:33 – ESLR hit my limit order and I was out at $1.02. $3100 profit after commissions.

See the trade

Using Tim’s alerts can be a great way to learn for beginners. His alerts can be great for more experienced traders as a way to call attention to potential trades. But I would never expect to make money trading them blindly.