I know if you’re reading this you have seen the countless amount of stock alert guru’s telling you how they make thousands if not millions trading stocks. Many of you have tried them and jump from one to the other. There are a lot of haters and promoters and its hard to really know who or what to believe. I’ve spent a lot of time working on this and I hope it clears up a lot of confusion of what newsletters are and what they are not. The focus of this is primarily related to penny stock and small cap newsletters. These stocks are usually the most risky but also have the highest potential of gains which is why they are such a hyped prospect for many entrepreneurs and retail investors. Hopefully this will help you make a better decision on picking one that works for you or maybe realize they aren’t for you after all.
How do Newsletters begin?
Lets say you’re a stock trader and you do really well trading stocks on your own. You have worked for a few years perfecting your system and in most cases you see another business opportunity to share your knowledge and system with others and in turn make some extra money. If you’re lucky you start with a few followers and if you’re system works, you will build your newsletter and make lots of money. If it doesn’t work, you lose your reputation and your business will fail very quickly. If you’re in the market for picking a newsletter that suits you, finding one that has been around for more than a year and also has a proven track record will be the first important thing to look at.
It’s very important to remember that no matter how good someone claims to be, if they’re not able to retain subscribers by sending good quality alerts then their business is over. Make sure they aren’t just starting on the ground floor, and if they are, make sure they aren’t charging a lot of money and take caution in trading with them till you can confirm they have a successful system.
How do Newsletters work?
The stock guru sends out an alert to his/her subscribers for a stock XYZ. The stock is purchased by the guru first and then sent to members to purchase after. Depending on the amount of subscribers and the float, the stock price could be higher than where they alerted it due to supply and demand. In most cases, this is just superficial demand and the price usually will retrace. This is where many people fail, they just buy at what ever the price is when they get to putting in their bid or just market right in at the ask. This can really hurt the profit potential of the subscribers trade. If the trade doesn’t work out, they will be at a bigger loss than the guru.
Here’s a couple things to remember, the stock guru needs to turn a profit as many times as possible and will try to use their system to pick stocks that have the highest probability of moving higher. They want their members to profit because they will in turn continue to stay members and help spread the word.
Are the guru’s getting paid to promote the stock?
I hear this come up a lot. There are people out there who are being paid to promote a stock. They get hired by a company and then they put together a fancy promo and send it out to their members and create an influx of buying and pump the price up, usually resulting in huge gains and then quickly followed by a big drop. This happens a lot with penny stocks and it’s usually referred to as a pump and dump. Here’s the important part, anytime someone is being paid to promote a stock, they have to disclose it or they could face huge fines and/or jail time. So make sure you always read the small print. The stock promoter is also not allowed to put any of his own money into the stock that he is promoting. Those two things alone should tell you if the guru is a paid stock promoter. Always be aware if they are a stock promoter and take caution, they are usually very risky.
I have complied a few warning signs to be aware of that might tell you to stay away from certain newsletters.
- Stock Guru buys large size of shares and sells for .05-.10 a share over the buy price. This to me is a big warning sign. The guru is basically using large size to show that he is making huge profits. Most subscribers are trying to build small accounts and this doesn’t help them whatsoever. Look for someone who more consistently hits their goals and focus more on percentage wins so that you can relate it more to your own portfolio.
- Stock Guru sends alert to buy, and sells within minutes of the alert. This is another big sign that your guru is using you. They are basically selling shares to their own members. Before most subscribers even have a chance to buy, the guru has already sold and is touting his win to his members and social media.
- Stock Guru doesn’t set a stop loss. This one is pretty simple, every trade entered into should have a stop in place no matter what. If you’re guru is sitting on a stock that is consistently losing and doesn’t have an exit plan, you better take a second look at who you’re following.
Who benefits the most from Newsletters?
I think for the most part, newsletters are designed more for people who don’t trade stocks for a full time job. They are there for people who have to work another job but want a quick way to make money. It can be a great way to make extra money but can also be a little more riskier depending on the types of stocks the guru trades. Its also extremely important that members who don’t have eyes on their stocks all day remember to place automatic stops so that in the event something happens when they aren’t watching they will be stopped out. Other benefits are for all traders is access to chatrooms where members can discuss and learn trading. The more eyes and ears the better and can give you the upper hand among other traders.
What Newsletters are not?
They won’t make you rich. They have the potential to make you some nice money over time, but the probability of becoming a millionaire is extremely low. It requires a lot more than just following someone else. You are also still 100% liable for your own trades, have a plan and your own goals and stick to them!
I hope this helps others make a better decision when it comes to choosing newsletters. I am a member of JasonBondPicks.com and PennyPro.com and believe they fall within the specs that I’ve outlined. There are many more out there so make sure you use your own due diligence and use the tips from above to help you pick one. I have found that I like having both, it gives me a greater exposure to what is going on in the markets and takes a little bit off my plate when it comes to researching stocks everyday.
Full Reviews can be found on the two services I mentioned above here…