How to Identify Stock Trading Scammers

Fraud on Twitter with Stock Trading

The following is a guide I compiled to help prevent people from being conned by frauds when dealing with stock trading. I focused on Twitter as a medium, but it applies to any medium (e-mail, websites, forums, TV, discord rooms and so on.).

Stock trading and Twitter together is a match made in heaven. Stock traders are quickly adopting Twitter for news and trading ideas. However, there is one alarming trend: a lot of people are able to profit from their unknowing Twitter followers by selling misleading subscription services to them.

The finance world is the most unethical/dishonest place in the world (remember the economic collapse of 2008). Some of the dishonesty that accompanies subscription services is due to competition. Each service has to do a "bit more" than competitors. It snowballs! People have to advertise in "creative" (dishonest/misleading) ways to gather their followers' attention.

It is important to highlight that even the slightest twist of the truth is still misleading, as that can be a huge difference when trading the Market. Here are a few tips that should be helpful in identifying dishonest/misleading stock traders on Twitter:

11) The Twitter trader in question speaks with 100% certainty. If someone speaks as if something in the market will happen at 100% (ex. "Apple will go to $200 by Friday"!), that person is full of it. Markets, for the most part, are unpredictable. There are just too many forces coming together for predictions to be consistently reliable.

10) The Twitter trader claims to have the market figured out with a special formula (ex. a better way to price options). Uh no! Not possible. This is an outrageous claim; only those not well-versed in the market will accept this reasoning. If it were true, a hedge fund manager would hire this person. They would be bigger than Blackrock.

9) The Twitter trader claims to be making 1000% on each option trade. If this is true, what is this person doing on Twitter? This seems to be the source of a lot of retail investors messing with out-of-the-money option strategies, due to a lot of "fakes" promoting this dangerous strategy. If someone is making 1000% on each trade, what are they doing on Twitter, babysitting their subscribers for a fraction of the profits they are allegedly making? After the 10th trade, that 1000% gain becomes over a million dollars.

Also, beware of those who trade options professionally for a living. Trading options and being profitable over a long period of time is nearly impossible. Either they are lying, or their subscription services involve them buying low-volume option strikes, where when you follow them in the trade it spikes up the price, thus making their trades quite profitable. In other words a low volume option pump and dump (similarly seen with penny day trading services).

8) The Twitter trader in question never makes a bad call. A lot of charismatic people have the ability to spin any call they make into a "good call". Beware. I see this happen all the time. Also, watch out for quantity versus quality. A good strategy to trick people is just to spew a bunch of trade setups nonstop, so many that people can't keep track of them. Then at the end of the day or week, just retweet your "good calls". It's not that hard; 50% of the time you will be right in guessing the direction!

7) The Twitter trader in question doesn't act professionally, and tweets don't seem to be written intelligently. Warning SIGN! If someone can trade the market using a winning strategy, their IQ should be high enough to speak and act properly on Twitter!

6) The Twitter trader is a "beautiful" girl (ex. current model on the side) and is now trading the market. These fake accounts post a lot of pictures of themselves (mostly model pictures they stole from Instagram or a model's blog) and try to add tweet captions, giving the appearance that this "beautiful" girl is trading the market. However, don't be fooled.  A lot of men fall into these stupid traps. The motivation for this scam technique is, beautiful models/traders tend to attract lots of followers, so they can grow really fast and gain popularity just by posting stock tickers and pretending to be a girl. Here is the solution/prevention: if a girl posts multiple pictures of herself, she should have no problems in holding her Twitter name on a sign and taking a picture, all doubt will be removed.

5) The Twitter trader doesn't keep a proper account of his/her calls. If someone is making claims, at least try to find a PnL spreadsheet with actual exits and entries that a person leading the subscription service actually took. This, unfortunately, doesn't fully verify anything, but this is the best we can do.

Also if a service shows you a spreadsheet with a crazy amount of positions (hard to put a number on how much is too much), they are probably paper trading. It's ridiculous to think someone can manage 15+ live positions, this is a huge hint at paper trading. Since it's very possible they took 30 positions, stopped out of 15, and now have 15 positions all green (of course all theoretical). Not practical. The slim chance these are real, you will get eaten up alive, trying to pick and choose these winners anyway since it's doubtful one can follow all these "buy signals". In reality, even if these claims are real, one must have a huge good-sized account, at least $50K.

4) Doubt theoretical profits. It’s not that easy to spot frauds, there really doesn't exist any way to fully verify actual profits (maybe a neutral hired auditor). Another way to spot fakes is to ignore whatever claims they say about their service via Twitter (I've noticed people have been very creative in spouting less than impressive results into something amazing). You will notice with a lot of services, if you dig through their websites, they keep actual trading results an Excel sheet. You'd be surprised how truthful these are, versus the claims these people make on Twitter. For whatever reason, these Excel sheets show more of the true story, and you will usually see something less impressive (ex. those .5% theoretical gains are actual .5% losses coupled with the fact that this service costs $100 a month).

Here is the catch though, the results on the Excel sheet are sometimes shown using fuzzy math. They don't always include the cost of commission (especially with options), and they often include theoretical buys and sells. Being able to show your results in terms of theoretical buys and sells can give the appearance that a Twitter trader is making a lot of money, but in reality, they are not. The theory is one thing, the actual execution is different (so many variables can cause these trades to go wrong).

Try to ignore results that show cash value. I see many services touting we made "$1,000 this week". What you should be asking is: What is the return on the investment? That $1000 could be a profit of $100,000 and often, a 1% gain when the market is up 6% is not very impressive. Profits should be shown in terms of percentages, not actual money (this is the easiest way people trick others). That 1% gain for you may be $19  when you are paying $100 a month for that sub-service.

In conclusion, anyone using theoretical profits you should doubt, this is a major red flag! The way it should be done is: the actual trades being executed by this stock Twitter trader should be recorded. At the very least percentages should be shown of actual trades.

3) Ignore CNBC/Fox Bussiness & Other TV Channel Personalities. It is best to avoid CNBC traders’ advice on Twitter; don't even touch the services they are selling.

2) Be wary of stock traders with a lot of subscribers who probably no longer trade (they make at least $150K a year with their subscription service). You can tell those who no longer trade by how often they tweet during trading hours; they tweet lots of ideas (as opposed to tweeting about their actual POSITIONS). They also often post obnoxious trading quotes as well. Real traders don't have time to mess with Twitter talking (tweeting 5+ tweets an hour) about stock setups and market commentary.
This means they are making more money with subscribers and are content not putting their money at risk in the market. In other words, whatever edge they are trying to sell to you is not that impressive (however it might be better than what you can do by yourself). There is nothing wrong with this ethically. Just be aware of it.

1) Avoid those who are not humble when it comes to the market and those who brag about huge gains (ex. "Only I know this stock"). Real winning/consistent traders know the market is not something you can take for granted. Those who get cocky will eventually get a huge beating from the market. Either that or the person in question is a paper trader.


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