Tips are for waiters

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In my days before trading for living I was a full fledged table waiter. As late nights of college homework and early morning classes require the flexibility of a second shift the restaurant provided abundance for me. Tips are we live in this profession. And all to often, I see and hear tips all over Wallstreet.

In an age of hyper speed transmission we are all sending information faster than sharks chasing a bloody meal. In this array of info us traders are letting each other know what we are doing and what we are seeing. The tips we give are in two very different fashions. One is the cold blooded tip of a single security to buy or sell short at a specific moment. The other is a more thoughtful approach of tipping.

The dilemmas I find with the cold blooded tips are many. For example if I go out and tell you to buy ($GOOG) tomorrow and you do you may make money or you may lose. My reason for telling you to buy the security could have been I have a large position to unload without trying to send the market lower, or I could have a tip of my own from somebody on the inside with knowledge of a certain company news release. Whatever the reason may be you have gone out on my recommendation expecting to make money. When do you sell it? How often can you go back the exact same source and get a sell signal on those shares of ($GOOG)? This sort of tipping leaves the tip taker to really have a false sense of control over his/her trades. If they make money they believe they have found the secret to the market by taking somebody’s advice. They are refusing to learn about their own psychology, the market in general, and how to profit on their own accord.

There is a type of tip I think is crucial to traders in this century. This is may be a direct recommendation of a security, but it includes a logical explanation of why one should consider its purchase or sale. The simple difference here is traders become willing to learn about the securities they trade. They think about the reason why the market moves after they have invested their money. They also take into consideration what another trader may seeing. What that traders indicators may doing. How the community a trader surrounds him/herself can be conducive to making money educating. Teaching the man how to fish instead of simple donating to his/her charity.

In closing my bias is this. Don’t take tips from random or even trusted sources. Take a tip only after learning why the tip-giver is handing the tip your way. I think you find if the tip-giver is really into helping you intrinsically they will want to teach you to make money. Without a subscription to newsletter, and without the profit from sharing the information. If a trader/investor is smart enough to steer you down a good path in the market they will not need to charge for sloppy tip.

stay hedged stay happy,

B

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