Why Most Stock Pick Service Fails
Here, we will explore the reason why most
…You know about the multitude of stock pick services out there that pick stocks for subscribers through newsletters and the internet, right? These stock pick services usually claim to be able to choose stocks that beat the market consistently. While some of these stock pick services truly produce consistent performance over the long term, many of these stock pick services usually fail the moment you sign up or after a short while. Here, we will explore the reason why most stock pick services fail to produce consistent profits for their stock pick subscribers. There are 5 main reasons why I think most stock pick services (taken that they are not simply scamming on the internet.) fail and these are also things you might want to make sure you ask before you sign up for a stock pick service.
Failed to trade both longs and shorts most stock pick services only recommend stocks that you are supposed to buy and hold. The problem with this approach to stock pick is that when the general market is trending down, almost all stocks will follow a general downtrend. If you are caught in one of these downtrends with a stock pick service that only recommends buys, then you might be in for some trouble, especially if the market is in a sustained downtrend that can last for anything from a quarter to a year. Modern stock pick services should be able to advise subscribers to go short or to give a bearish recommendation to be executed through instruments like options. This is the only way a stock pick subscriber can hope to profit under most market conditions.
Reason # 2.
Failed to provide an exact stop-loss point most stock pick services out there only tell you when to buy a stock and leave you with nothing more than a profit target so where do stock pick subscribers stop loss when things go wrong? Most stock pick services leave that to your own devices and often result in catastrophic losses which completely obliterate any previous profits. (remember LTCM?)A good stock pick service should provide an exact stop loss point which should be established the moment the trade is put on. Most entry signals are completely ineffective after it has gone sour beyond a certain point. A good stock pick service should identify such points of no return as points to prevent catastrophic loss of capital.
Reason # 3.
Fails to have an optimal profit-taking strategy most stock pick service provides no more than a profit target for their recommendations. Sadly, such profit targets are nothing more than mere speculations. Imagine this, if the stock really moves within 5% of its profit target are you to take profit now by ignoring the recommendation of the stock pick service, or do you want to wait and risk having the stock turn back down on you? Even if the profit target is fulfilled, how are you to know that this is not going to be the big winner of the year moving up another 10%? A good stock pick service NEVER gives a definite profit target. Instead, it will have an optimized profit-taking strategy based on the behavior of the strategy that is being used. This profit-taking strategy is different from different stock-picking strategies and must be optimized such that stock pick subscribers can confidently take profit when asked to do so. Yes, the stock pick service must tell its subscriber when it is time to take a profit instead of leaving the stock pick subscriber to their own devices.
Reason # 4.
Fails to pick winnersProbably the main reason why most stock pick services fail. Whether be it a bullish or bearish recommendation, if you cannot pick the right stocks, you cannot make money. Period. A good stock pick service must have a method of picking stocks that is both scientific and logical. It must not use the mere hearsays on the street, their own gut feeling, or the recommendations on TV and make it their own. Most good stock pick services will explain their unique method of picking stocks.
Bottom line is, that you should rely on your experience and Due Diligence.
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