Investing with Stock Trading Services That Teach

The other day, we covered the MarketClub stock trading system. Today, we follow up on such services in general.

Stock trading systems are reviewed all over the Internet. You can easily find reviews based on a variety of criteria, but going with the stock trading service that’s number one on a list may not mean you’re choosing the best option for you. Part of the problem lies in the primary criteria for many reviews — they look for the services that are consistently out-performing others. Don’t get me wrong: performance is crucial. After all, we use stock trading services so we can make money!

But choosing such a service based solely on returns may lead to a less than satisfying relationship. If you’re a relative newbie like me, you may instead want to go with one that does the best job helping you learn. I’m not talking about a quick, five page report on how the stock market works. That’s not enough to make you an educated investor.

Tip: In reality, online stock brokers like Scottrade offer many investment tools and trading resources for free, so they’re a good place for aspiring stock traders to begin learning about the stock market.

Investing with Stock Trading Services That Teach

If you’re ready to invest in your financial education, look for trading services that offer lots of ongoing education and a variety of stock trading tools to take you from novice to knowledgeable, including those that will familiarize you with a variety of trading styles. Ask yourself some relevant questions when you check out online stock trading systems and services so that you can choose wisely:

1. Does the service offer a wide variety of trading strategies? There is no one system that will help you trade perfectly for every situation any more than there is one type of investor. You’ll learn more and have a better experience if you choose services that utilize several trading strategies. Using a variety of strategies also protects your investment dollars. Diversity is a good thing. Does the site offer Share Purchase Plans? Option Plans? Can you invest using a variety of strategies for both short and long term growth? Do the stock trading services you’re considering give you a range of investment opportunities from high risk to relatively stable?

2. What types of educational tools are offered? Top notch stock trading services offer you both online and offline educational tools. It’s great to log into a discussion forum to follow particular trades, but to receive a solid foundation, you’re best served by self-paced learning. Look for services that supply e-books or substantial white papers that you can download. I like to read an e-book at my own pace; I like to take notes and give myself the time to digest the content.

Confidence may give you the courage to trade, but if your confidence isn’t backed by a real understanding of the market, you can get yourself into serious financial trouble quickly. Being a blind follower isn’t the answer. If the last few years have taught us anything, it’s that not even the experts can predict every fluctuation in the market. Learn everything you can. You are the best judge of how much risk you’re willing to take, but you have to understand the nature of those risks to make a good decision.

I recently downloaded a set of great e-books from Planet Wealth covering two investment strategies I’m interested in – Renting Shares and Option Spreads. After reading them once, I went through them a second time and took notes on questions I had, then visited the stock trading website and posted my questions on their forum. Which leads me to the next crucial question…

3. Does your stock trading service have an active online community? Open discussion and debate are invaluable learning tools. Think back to college. Reading the textbook just wasn’t enough; classroom discussion prodded you to think for yourself and discover new ideas. The same goes for stock trading tools — a strong discussion forum is a great place to learn. You’ll find answers to your questions and learn from others who have questions you might never have thought about on your own.

4. How transparent is the service? Many sites offer you online trading tools or the option to make the trades they recommend. The best sites not only offer you the chance to follow their lead, but they also explain why you should.

If you use one of the few stock trading services offering detailed, clear explanations of how they chose the stocks they are recommending, you can learn a lot. I’m working with Planet Wealth, an online service that provides a three step process to choose stocks, along with a detailed analysis of each choice, in their Stock Trading Diary. Their insightful commentary is often enlightening, pointing out rationales I wouldn’t have considered. Every trade they make is posted and analyzed; it’s a rich learning opportunity for novice investors.

Can you settle for stock trading tools that leave you to sink or swim on your own? Sure. Could you work with stock trading services that tell you what to do and that expect you to follow blindly? Certainly. But I prefer a balanced service that will give me an in-depth education that I can build on to help me become a savvy investor in my own right.

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