You must have seen a variety of trading platform advertisement on Instagram. I began to trade when I saw a FOREX advertisement on Instagram. I would always be on my phone waiting for trading tips from Telegram and then trade on them. It did not go well… The business behind providing trading tips is that they receive a fixed subscription fee from every subscriber. Professional traders and investors understand why trading tips do not work. For common investors, we only look how much people are earning through trading FOREX. This is the reason why businesses who give these trading tips are doing so well. For novice investors, please do not fall into the trap of trading tips.
“There is no such thing as a free lunch” in trading.Sunny Lei
The complex theory of why trading tips do not work is that if everyone follows the same trading tip, the opportunity of making a profit will be gone. Why?
A famous study known as the “Monday Effect” describes exactly why trading tips do not work. The “Monday Effect” is a theory which states the return on Monday is higher than that of other weekdays. This may be an excellent trading tip if only you have noticed this trend. When 100 traders around you also catch this trend, what would they do? They would buy a lot of stocks on Friday and sell them on Monday to gain higher profit. What happens when a lot of traders buy on Friday and sell on Monday? The price on Friday would be very high and the price on Monday would be relatively lower. This eliminates the opportunity of making a profit.
Now that we have understood the “Monday Effect”, we can see that there is slim profit in the trading tip business. Also, it is important for investors to acknowledge that many fraudulent companies would provide false trading tips. Fraudulent companies may show impressive results based on their daily screenshots. Just keep in mind that everything could be photoshopped.
For investors who have just begun, I recommend reading my other posts about “How to Invest for Beginners”, and “How to Trade for Beginners”.
If you find this helpful, please share your thoughts in the comment and question section. Writing these articles motivates me to become better every day and share more about personal finance while learning along the way.