Are you thinking entering the fascinating world of stock trading? You are not alone - Online stock trading is clearly a phenomenon of our times. It is one of the most popular forms of trading because the only components you need are a computer and an Internet connection. But be warned: Stock trading is not something to jump into without considerable thought. Estimates are that 80% to 90% of all those who begin stock trading today will lose their trading capital within the next 12 months.
Stock trading is like running any other kind of business. There are three "secrets" to stock trading success:
Buy when the market is going up and sell when the market is going down.
Always know when to exit. Have a stop loss and a profit target
Pick the "right" stock In this article we want to focus on "picking the right stock". Many traders are looking for help using so called Stock Picking Services, and they start their quest by entering the search term Best Stock Picking Service into the search engines. Not surprisingly, these "Best Stock Picking Services" often require a hefty fee for their services, and you might end up getting caught in a so-called "pump-and-dump" schemes.
Here's how it works:
These so-called "Best Stock Picking Services" buy a certain stock that's typically trading at $0.02 - $0.10. Many times, these stocks are not even listed on the exchanges, and the volume is typically only a few thousand shares per day. After these "Best Stock Picking Services" bought a few ten-thousand of these shares, they start recommending it to their subscribers. You will experience that it is not easy to buy these stocks since they are not listed on regular stock exchanges. And if you ask your broker to buy this stock for you, you might end up paying 4-5 times more than normal commissions.
The "Best Stock Picking Service" is now hoping that many of their subscribers will start buying this stock. They typically say "It's trading now at $0.02 and it should go up to $0.12". That would be a whopping 600%. Since stock traders are greedy by nature, many people might start buying this stock, and since there is a sudden demand, initially the stock prices will go up.
But before the stock hits the predicted exit price, your "Best Stock Picking Service" starts selling (dumping) the stock that they bought BEFORE they recommended it to their list. Since they typically bought large amounts of this stock, there's suddenly an enormous supply of this stock and prices start falling. More and more investors panic and sell their stocks; driving stock prices further down. After a massive sell-off the stock is typically trading at the same level as it was BEFORE the "Best Stock Picking Service" started recommending it; sometimes even below. Investors are losing their money, and the only winner in this game is you "Best Stock Picking Service".
Solution
Learn how to find your own best stock picks. It is not as difficult as you might think. We will cover some basic stock picking rules in another article.
Conclusion
YOU are your own best stock picking service. By all means avoid subscribing to a service that is only "pumping" a stock to investors to drive the prices up and then "dump" it before the investor knows what's happen. Learn how to do it yourself, and you will save a lot of money. Go to seminars on stock trading, buy books, use simulations if possible and practice reading market indicators. Get a mentor.
In short: Get educated. It's the best investment you will ever make!
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