Written by A.J. Brown

The Downside of Stock Picks & the Importance of Mastery

Stock Picking ServicesLast week, I asked the question, "Why aren’t we all rich then?" I used this question to bring up the topic of stock-picking services and "experts" who hand you trades on a silver platter. The reason I brought the topic up in the first place is because it seemed to be a common theme among my Trading Trainer members last week.

The response has been overwhelming. Twenty-six comments so far. And these are not wimpy comments either. Most of them are very detailed, in-depth, and well thought out. Furthermore, it seems a lot of traders have had less-than-optimal results with such "turn-key" services. Here’s a sample of what some traders said…

  • Earl Elliott reports, "My experiences have all been negative."

  • Michelle Beierle says, "What I’ve learned about ’silver spoon’ services is if they look too good to be true, and if they have to toot their own horn, stay away."

  • John Larsen writes, "I fell for a ‘Black Box’ deal and it was a bummer."

  • M. P. DeWalt makes a good observation, "It’s the newsletter syndrome. Service A shows outstanding historical results (I have no data to show they’ve been doctored) and idiots flock to them only to realize they just had a good run and their consistency was related to market dynamics and possibly not their skill."

Finally, Ken Long sums it up well with this comment:

I’ve learned that I don’t care for services that try to feed me trades, with precise entries and exits. I appreciate knowledge and assistance when reasonably priced. Anything to help speed and streamline the process of finding good potential trades.

I’ve found that it is more important to develop one’s personal trading style than to follow any one person, no matter how good they are.

A few observations of my own…

1. Stock picking services actually need you to be dependent on them. If you actually learned to do what they do, you wouldn’t need them anymore. And so these types of services are not really interested in teaching, educating, or providing understanding.

There is an old saying almost everyone has heard: "If you give a man a fish, he eats for a day. If you teach him how to fish, he eats forever."

Stock picking services give you the fish. And you may (or may not) eat for a day. On the other hand, if you develop a deep understanding of a certain skill (like option trading), you will eat "forever."

2. Not all stock picking services will make bad recommendations. Some subscribers will make money on some trades. But many will lose money. Why? For many reasons…

Sometimes the picks are simply bad picks. Other times the margin of error on a trade is so small that an experienced trader might be able to squeeze out a small gain while an inexperienced trader gets slaughtered.

Still other times, the "success" of the stock picks may be based on overall market conditions instead of the skill of the people picking the trades. A strong bull market, for example, can provide good cover for ignorance… at least until the market softens or turns south.

3. If you want to make consistent profits in any endeavor, you must strive for mastery. This does not happen overnight. It requires work. A lot of the necessary work happens right at the start because you have to overcome the initial learning curve. From there, it’s more about action, implementation, and learning from experience… trial, error, and correction.

Stock options trading, like many opportunities, can be quite lucrative. But it will be lucrative only to the degree you’re willing to invest in yourself, learn from your mistakes, and seek mastery of the skill.

If you’re in this only to "get rich quick," you might have a lot of hard lessons coming. Don’t say you weren’t warned. ;-)

Best regards always,

A.J. Brown

Categories: Education / Success

4 Responses to “The Downside of Stock Picks & the Importance of Mastery”

  1. ALMA TRENT @ 5:31 pm:

    A.J., Thank you for your "commom sense" assessments. Comments such as this one (along with many other amenities) makes the membership worthwhile.

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  2. Anil Patel @ 5:52 pm:

    Respected Shri A.J.Brown

    I had been through both the blogs. I tried to analyse at my capacity,that what massage you want to put the trading community.

    But,let me tell you very frankly that you have thrown a foundatoin stone for the house a trader wants to built a HOME to live a successful life, because the success always sitting on knowledge with determination,dedicatoin and involvement.

    I wrote to much right?

    Please keep it up.

    Thanks

    Anil Patel

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  3. Personal Finance Money Tips - March 15 2008 | KCLau's Money Tips @ 6:08 pm (Pingback)

    [...] Brown presents The Downside of Stock Picks & the Importance of Mastery posted at A.J. Brown’s Options Trading Blog, saying, “This post explores the risk of [...]

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  4. boozwatt.com @ 1:16 pm (Trackback)

    The Carnival of Smarter Investing #15…

    Welcome to the Fifteenth Edition of The Carnival of Smarter Investing! We’re back with our fifteenth edition of CoSI, so sit back, relax, and enjoy this supersized gathering of featured articles by investors and writers in the areas of business and re…

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