While learning new trades, many beginning traders turn to trade recommendation services. I believe there is nothing wrong with this, assuming 1) the trade idea being taught is profitable and 2) the student is actually learning how to find, execute and manage the trade so he can do it on his own in the future.
But trading can be an extremely emotional challenge for the beginner. So much so, that even following someone else’s trades is not always a great solution, especially if the subscriber is really looking for someone else to take responsibility his trading. Even if the the trade recommendation service presents good trades, the subscriber often cannot actually follow the recommendation for various reasons. Usually this is because the subscriber:
1. Does not understand the trade
2. Does not understand the risk of each trade and risks too much (and gets hurt on the inevitable losing trades)
3. Puts on positions that are far too big (risks too much)
4. Does not understand that successful trading involves losing trades as well as winning trades.
5. Does not take responsibilty for his actions
This is why understanding why a trade has an edge, understanding position sizing and exercising impeccable risk management are so important to trading success.
If you don’t understand why a trade recommendation service is recommending a trade, you likely won’t be able to follow it.
If you don’t know how much you plan to risk on a trade from a recommendation service, you will be trading emotionally and are likely to lose.
In short, even if you are trading based on someone else’s trading recommendations, you are in the driver’s seat! You and only you decide how much you will risk, which is always the most important decision you’ll make in any trade.
When you trade, you are risking real money. If you lose too much of your money, don’t blame the recommendation service. You likely risked too much money on a trade you did not research and that you did not understand.
