How to Use Alert Services and Pre-Built Strategies the RIGHT Way

If you’re at the very beginning of your trading journey, or you’re struggling to become profitable, you may tend to lean toward just wanting to have someone else do it for you. It’s very common and it’s certainly understandable. You feel like there’s so much to learn and you just don’t know enough yet, or maybe you think it would be best just to leave it up to the “professionals” to grow your account.

And this is where those people selling trading services and pre-built strategies make their bones.

You think surely these people who claim they have these ready-to-go and allegedly profitable strategies and alert services will make you profitable if you just follow their trade alerts or trade their pre-built strategies. This certainly seems logical. How can you argue that actually taking the trades of what’s sold as a highly profitable trader’s alert service or trading what’s promoted as a highly profitable strategy wouldn’t work? Makes perfect sense, right? You should be able to just plug them in and play, right?

The problem is, the longer-term results almost always say otherwise.

And that’s because there’s a right way to use these services and there’s a wrong way, and many of us tend to use them the wrong way in the beginning. 

So let’s talk about the wrong way: you think these alert services or pre-built strategies will be all you need to make money in the markets.

As far as trading services go, they send the alert to enter the trade, you enter. They give you the alert to exit, you exit. You make money. Right?

How can you not think this is going to be all you need to make money in the markets? Maybe you don’t need to learn to trade for yourself after all!

And when these services actually work for a while, like weeks or months, it can end up being the worst thing that can happen because it can give you that false sense of security and the expectation that they will always work for you.

But, again, the longer-term results are not in your favor.

One of the problems with alert services is the inevitable time lag in the delivery of information. The trader’s fill price may very well never be the same as your fill price. You might get much worse; you might get much better. Therefore your results will typically not be the same.

Or maybe they send an alert and you aren’t in a position to take it at that moment. You missed it! And it always turns out to be that one awesomely profitable trade. Ugh.

And not only did you miss the trade, you still have to pay the trader for the service. So it’s a double whammy at that point.

Or you happen to subscribe to the alert service right when it hits that drawdown after several winning trades. So now you hate the service because you think it’s bogus and doesn’t work at all. And now you’re spending all of your time figuring out how to cancel it instead of how to trade.

But let’s assume the alert service is continuing to work for you. It doesn’t have the best prospects for the future if you really think about it, does it?

What if the trader stops offering the service or becomes incapacitated in some way? Or what if the trader decides to change it or tweak it enough so that you no longer want to trade it? You’re right back to square one at that point because you haven’t been spending your time actually learning how to trade.

Okay, well then if an alert service isn’t the best idea, how can you argue that purchasing and trading a self-proclaimed profitable trader’s actual pre-built strategy wouldn’t work? I mean, all you have to do is buy it and follow the guidelines, right? Easy.

You buy a trader’s strategy for a sum that is not small (I typically see costs anywhere between $500 and $10,000) after being told it returns 50% per year. Wow! You’re all set. You’re done. No worries. All you have to do now is follow the rules and you’re good.

But this is an important misconception that most of us have had. “If I can trade like someone else or trade someone else’s strategy I can do as well as they can.” But you’re not someone else. You’re you. And that makes all the difference.

The only way you can make consistent money as a trader over a long period of time is to find what works for you and execute it in a disciplined way. You have to figure out who you are in the markets and what you do.

When you blindly trade someone else’s strategy the first problem is that you don’t always know if they actually know what they’re doing. The trader has claimed that he or she is consistently profitable but do you know that for sure? If you do somehow know that for sure, do you know for sure that the actual strategy is appropriate for the current market environment?

With any strategy that you didn’t design yourself and may not completely understand you’ll invariably reach a point where you don’t understand one of the rules in the trade plan, you don’t agree with it or you think it may lead to a loss. So you’ll change it, which means you’ll end up changing the entire course of the strategy because you think you know better than the rules or you’re afraid to apply them. It will then cease to be the strategy you bought and you’ll find yourself lost in a position you don’t understand.

Or when you hit that inevitable drawdown, just like with the alert service, you start getting emotional and questioning the validity of the strategy because you don’t understand why it’s drawing down.

This is because you didn’t design and build the strategy yourself. You didn’t put the strategy together based on how you see the markets and how you will adapt to how the markets change. You didn’t stress test it, think about it, practice it, study it, get familiar with it.

So when the markets change and the strategy starts to struggle, how will you adapt if you don’t fully understand what you’re trading?

Even if you do understand the fundamentals of the strategy, are you going to stick with it and endure that losing streak while you’re waiting for the environment to change again?  Or don’t you think it’s a good idea to start learning how to trade for yourself so that you actually have something that works in the new environment?

What if the environment doesn’t change back to what worked for the pre-built strategy? No market environment is ever exactly the same.

Dealing with adversity in the markets while trading someone else’s strategy can be like sailing through a huge storm in someone else’s boat that you’re not completely familiar with. You don’t know how it steers, any tendencies it may have, where all the controls are, where the bilge pump is. At some point you just want to give up and abandon ship.

But if it’s the boat that you built yourself, you surely built it to withstand such things. You know it like the back of your hand so you’re much more confident navigating your way through the rough seas.

You can see how blindly following trading services and other traders’ strategies can be detrimental to your growth as well as to your capital.

But don’t worry, paying for these services and strategies can still be extremely valuable because there is a RIGHT way to use them that can pay big-time dividends for your development as a profitable trader.

If you simulate (paper trade) them or trade them live with very small risk and simply focus not on the actual profit & loss they generate but on understanding why they work, why they don’t work, when they work, when they don’t work, why they were built the way they were built, etc…

 

Now you’re on to something. Now you’re making progress. Now you’re cooking with gasoline.

I paid so much money for so many alert services and pre-built strategies I can’t even recall all of them. I subscribed to virtual trading floors, bought stocks that famous money managers talked about on TV and traded every new idea I could find on YouTube. And I wanted them all to do the work for me. But I always found out that none of them had any staying power, for all the reasons listed above.

When I started using services and strategies the right way, which was for purely educational means, they led to discoveries and personal development I never thought possible.

And then I started to make them my own because I understood them on a deeper level. I would start tweaking them in a modeling or paper trading environment and running entirely different strategy models based on their fundamental concepts. 

I was using them for my own personal trading growth, like a singer/songwriter who begins by singing and playing other peoples’ songs, starts to write his or her own songs from these influences and then goes on to have a successful career with original material. I guarantee that this is how every great singer/songwriter started.

This is how I developed my own profitable strategies and how I took that next step toward profitability.

Everything I do now to make money in the markets has borrowed something from these services and strategies and benefited from them in some way. But nothing I do is exactly the same as what any other trader does, I guarantee it.

You have to understand and accept that there’s going to be a period of time that you need to focus on learning and not on making money. Once you start to personalize strategies that fit your personality and lifestyle, practice them over and over and get better at them, the money will come. But you have to accept the fact that you can’t just jump in and start making money, no matter what they tell you in all those promotional emails.

So, just to be clear, there’s nothing wrong with paying for an alert service or buying someone’s pre-built strategy. Just make sure that whatever it is you use it the right away by allowing it to teach you who YOU are in the markets. This is the only way you’re going to reach consistently profitable trading on a long-term basis.