If you have been in the trading community for a while, then you have most likely come across the world of “chatrooms” before. This is where you can find a group of traders who typically trade together at market open and spit ideas back and fourth about possible decisions each trader might be making or stocks they have interest in.
There are a lots a trading chatrooms on the internet that will try and persuade you to subscribe to them for a cost, and in return they often make plenty of promises to make you a better trader.
On this post, I am going to run through some pros and cons of stock chatrooms. The goal is to make you self aware by helping you distinguish the difference from a good stock chatroom, and a scam chatroom.
Pros of Stock Chat Rooms
- Trading Community. I believe this is one of the most important things to have while trying to trade stocks, especially if the goal is to trade full time. Trading can be lonely, especially if you are trying to do it by yourself. Having the right chatroom can give you that sense of family when you wake up to trade. You get to know people and there different personalities along with their trading styles. Some chat rooms even do monthly meet ups to put a face to the names.
- Advice. You could be a novice trader or a an experienced trader. Somewhere down the road you are most likely going to need advice, and the sooner you can ask for it, the better. There are a some chat rooms that have members and moderators who are very helpful and if you have questions they are often glad to help. They are often glad to help because they too were once in that position.
- Mentoring. Some chat rooms offer paid mentorship for private sessions. I would test drive the chatroom first before doing this however, just to get a feel of the room and to make sure the moderators prove to be knowledgeable about trading.
- Shadowing. This to me could be the most beneficial pro of a chatroom. However not to many chat rooms provide proper shadowing. What i mean by shadowing is a chatroom where the moderator ( hopefully a successful trader) actually shows the memberships when hes buying and WHY. Not simply alerting members when hes buying, but actually teaching them the method for coming to the conclusion to buy or sell.
Cons of Stock Trading Chat Rooms
- Fees. This really grinds my gears. I understand that traders are trying to make extra income on the side, but some of these monthly fees for chat rooms are absolutely ridiculous. $300,$400, $500 dollar and up per month to just be in a community with other traders. I mentioned earlier that it is very important to have a community in trading, but with hefty price tags like that, i’m sure you can find cheaper trading buddies. For those prices the chatroom needs to be able to actually teach you how to trade for real, not just follow alerts.
- Pump and Dumps. The good ole pump and dump chat. For those who are unaware of what this is, time to break it down in simple terms. Group of people, or just one person decides to open a trading room where they promise to give you the best stock picks, or to alert you whenever they are going to buy. GREAT!!. It sounds sooo enticing to beginner traders. They wouldn’t have to do research, look at the market after hours, make hard decisions. Why would they when they can just buy and sell the same time as the people running the chatroom. The problem in almost all cases is that the people that are running the chatroom are simply going to buy ahead everyone else without telling them, and then give them a later alert so that the heard of members can push the price of up in the favor of the moderator of the chat room. The moderator then sells into the push and leaves everyone else holding the bag as the stock dumps, and it almost always dumps, leaving the majority of members with a loss. Those members will quit after awhile, but there are always incoming new members, so its an everlasting cycle.
- No Self Reliance/ Independence. This is characteristic that any chat room can inflict on traders if the trader is not self aware of it. Traders who use chat rooms often becoming way to dependent on the chatroom, to the point where if the chatroom were to vanish into thin air, the trader would literally be in a world of hurt because he/she is unaware of how to trade for themselves. Being in a chatroom, especially at the beginning of your career can make a trader believe that trading is so simple because trading in a chatroom requires nothing but following the person charge. Then when that chat room is gone, it becomes a rude awakening for that trader. It is better to use the chat rooms after you develop the ability to trade by yourself, and then you can use chat rooms for extra tips and support.
- Stuck Up/Not Helpful. In the Pros section I mentioned that some chat rooms can be helpful for advice and shadowing. Well, here is the other side; a lot of people in these rooms are stuck up and arrogant. I’ve been through my fair share of chat rooms and what I witnessed, in my opinion, was borderline bullying. We were all new traders at one time, so it literally tears me apart and makes me angry when a new trader comes to a chatroom of more experienced traders and is getting dragged and humiliated because he simply asking questions. I’m sorry Bill, we all didn’t come out of the womb knowing all there is about stock trading. It may seem dramatic, but learning to trade is very intimidating in itself, so that first thing you or any normal person would do is ask for help. I recommend that if you are on the beginner side of trading, that you find a more friendly chat room where the members want to help each other grow, not tear each other down.