It’s been awhile, I basically took the summer off but should be posting once a week from here on in.
The title of this post comes from one of my favorite Frank Zappa songs “Cosmik Debris“. While I was listening to it the other day and pondering my existence as a trader today, I was compelled to write my observations about the current state of Twitter, chat rooms and other pay for stock trading services ,watch lists providers etc. Before I delve into that however, a little background into my psyche is in order.
Trading has always been important to me financially as well as socially. On the trading floor of The American Stock Exchange, I was in contact with hundreds of people everyday. Some people were enemies, others competitors and acquaintances and some were like brothers to me. I met and interacted with people I’m sure I would never talked to much less become friends with and I’m forever grateful for the time I got to spend there. The point is there was a lot of opportunity to talk about other things than trading , but in a second, stop the conversation take care of business and go back to whatever mindless shit we were talking about. OJ Simpson , Amy Fisher and Robert Chambers certainly provided much entertainment back in the day for example. Of course having a sanity check with regards to a trading idea or position didn’t hurt either.
Then I became a partner in a hedge fund and my world shrunk when I went “upstairs” . Now I had only the 5 other traders and small support staff to be social with in person. Of course I was on the phone all day with brokers fielding hundreds of shows per day in addition to multiple instant message windows that were open simultaneously. Still not quite the same thing.
When I was at the bank, I was surrounded by hundreds of people but it was different. Silence is golden on a bank trading floor. Idle conversation and socializing is frowned upon. Our options desk was new to them and we were gawked at constantly by the other groups that didn’t conduct their business like we did. Yes they had a salestrader on the phone with his customer and the salestrader needed markets from the facilitation trader, but equities is far slower moving and less complicated than options so it requires less communication. I digress though. Ultimately, I stayed within the confines of my 15 person group and whatever customer we had to entertain that night. I also wasn’t a big fan of 7 A.M breakfast meetings that occurred frequently especially after being out until 2 or 3 in the morning the night before. That kind of socializing I could do without.
This brings me to my current situation. I’m retired from trading on a professional basis but I’m an active retail trader for myself these days. After sitting at home for months on end being bored to tears and feeling out of touch with the world, I decided to follow some people on Twitter. I thought it would give me some insight as to what was active as well as keep up with news and maybe at least interact with some people. What I found was 90% fluff, followed by people pumping their thinly traded roach motel stock positions, shameless shilling of shitty stock trading services and an occasional gold nugget under a pile of poo.
First of all, there is no guru in the world with 90% plus daytrading track record of wins willing to sell their service for a mere couple hundred of dollars per month as claimed by some hucksters. It’s mathematically impossible to have a track record like that for years straight. See Bernie Madoff for a large scale example. What is probable is having a room full of guppies chasing some cheap dollar stock that the chat room owner has bought already and feeding it out to his followers. I’ve found multiple examples of this after joining several of these chat rooms just to satisfy my suspicions. In some cases, the stock has run before the trade is even chatted which tells me also that some people are getting the look before the trade is ever is posted. That make 2 different levels of scamming in reality . Plus the chat room owners get the cushion of getting paid monthly to shear the sheep.
Other furus (fake gurus) seem to make their living by finding thin float names with good basing chart patterns that they have walked up about 5% on the day already. The stock has only traded 20,000 shares or so and it’s 5 hours into the trading day. Then the tweet goes out ” XYZ on high alert” and of course there’s 5000 shares conveniently on the offer at the high of the day. The stock usually has terrible fundamentals and the last buyers who were “lucky enough ” to scoop 25% of the days trading volume off this alert on Twitter are stuck holding bag. Meanwhile, the tweeter is out at the highs and the stock never sees another uptick .
Listen people, just use a little common sense ! Chances are that if a trading service is run by a person under 30 years old and/or was never in the business in any way shape or form, you are being scammed. They might be excellent marketers and promoters, but they are not rock star level traders. Usually there’s a hard luck story involved, or they were just an ordinary Joe but then they had a “system”. Or they had a mentor or discovered a new secret trading strategy. There is no holy grail, shortcut, or anything new under the sun. What there is are hours of hard work, trial and error, the determination to succeed and discipline. In the end, you have to do your own work ! Also keep in mind that many testimonials for these services are complete bullshit. Just because it’s on the internet doesn’t mean it’s true. There’s one service who features video testimonials that is so absurd and ridiculously funny, I almost thought it was a joke.. Waitresses, plumbers and fast food workers etc are featured swearing they make more money swing trading than at their jobs. Not that there is anything wrong with any of these professions, but it just doesn’t make sense. Also realize that many services offer large affiliate payouts for people to troll the internet and bring in subscribers.
Another good way to tell if you are in an inferior chatroom is to ask an informed question and watch how quickly you are muted and the question never makes it to the chatroom. I’ve questioned entries by a mod in a chat room by looking at times and sales and things didn’t add up. I asked about it respectfully and was silenced immediately. Then unsubscribe to the service and watch how quickly you are blocked from the service on every social media site in the world.
There are some legitimate services and rooms out there and they are usually very soft sell and some even have a trial period. Some common characteristics of legitimacy are they are run by a champion trader, an ex Wall Streeter, or they are providing current data such as actively traded issues or options for a reasonable price. Often the website owners are published authors and have real verifiable credentials and track records. They are on Linkedin and are connected to big swinging dicks in the business. Many of them will post watch lists and trades based on tried and true patterns of real stocks that trade millions of shares a day and are over $10 per share. Many of the companies on the watch list are household names for instance. Most of the real services could care less whether you stay with them for 1 month or one year. In fact, one watch list service I know almost insists you leave after a few months because you should be able to feed yourself by then after learning their method .
I’m sure you are wondering why I haven’t listed the names of the bad guys I’m referencing . After reading through the small print when joining these “services” I’m opening myself up to lawsuits and breach of contract issues. I also do not want to be involved in the petty pissing matches that I see on Twitter all day. It’s a terrible use of my time, energy and money to defend myself against these master marketers even if they are complete frauds. I’m also hesitant to mention the good ones out there because I don’t want to be accused of being a shill for their services either. I really just wanted to give you something to think about. To think, this all started because trading at home is such a lonely endeavor and all I wanted to do is connect with like minded traders.
I urge you to try many different sites to see if their trading philosophy and style matches yours. What good is a service to you that only buys breakouts if you are primarily an oversold dip buyer for instance ? Also find a place where results can be verified and the room has traders and moderators that are seasoned and not just pumping each other up on Twitter.
There are some excellent books out there on general trading, options, trading psychology and risk management. I will compile a list with links next week to point you in the right direction.
The thing to remember with trading and everything else in life is if it’s too good to be true, it’s most likely bullshit.
