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Matthew Poll on Identifying a Day Trading Scam
“The primary thing I would look for in avoiding day trade scams is going to be around control. There’s this association that if you’re a day trader, somehow, that some scam’s going on. I found that’s completely not true.
If someone’s classifying themselves as a day trader, they’re the ones in control. It’s usually their own money. Or it’s their own retirement or some money that they raised or earned from something else. And so they are in it with their own funds. Where I start to see the most day trading scams is where the people don’t have control.
Furthermore, the trading scams happen when people are trying to take other people’s money, or they have a “fund” people are trading. Or they have some promised delivery system. You know, some thing they were trading that was making a bunch of money, and it really didn’t.
Then it ends up turning out to be a Ponzi scheme. Raising money from other people. And in return, they’re actually not even trading. They’re just living off of the money that people gave them and never actually went out and traded in the first place.
I hear stories, probably a couple each year, of people losing millions of dollars to these types of day trading scams. It’s a real thing. So control is a big piece.
If the money’s not in your bank account, it’s a lot harder to control what’s going on with it.”
How do I know if I’m currently involved in a day trading scam?
“So if you are already giving your money to someone else, you might be hearing this for the first time and going “am I a victim already?” And that’s a great question to ask yourself.
If you’re giving your money to someone else who’s classifying themselves as a day trader, they have a system and they’re supposedly trading it. I’m not saying there aren’t legitimate people that are out there doing this, but a lot are doing it in an illegal way.
You might ask some questions. I would look at the language that was used to enroll you and getting your money. And one of the words that I would look for is “guarantee.” If any type of day trader makes a promise that they can guarantee some future result. That is a enormous red flag to me. Because one, this is a highly regulated industry, and you just can’t do that. You can’t use words like “guarantees” in the day trading world where there’s risks. It just, it’s not possible. It’s not possible to have a guarantee in a world filled with non guarantees.
So it’s just it’s a paradox. Really, it’s like this is that reality, there are risks. So you can’t make guarantees. If they use that language, you’re you’re probably at a higher risk. They’re running some type of Ponzi scheme.
Other words or language that I would look for is disclaimers. If they didn’t hand you something that had disclaimers. If you didn’t see federal state disclaimers on stuff that you signed, or if they’re not registered. That’s a big red flag for me. Because, again, this is a very highly regulated industry. And if they’re not in compliance with those things, it’s like what else? What other rules are they breaking? What other things are they doing with your money that doesn’t fall into this? This is a regulated industry and so I would immediately see that as a sign like, hey, something could be going. I’m not saying it is, but could be going wrong here, and would be worth investigating.
Now, if you’re being approached at the moment, those are the type of questions I would ask. I think “you just made a guarantee, I know you’re not supposed to be doing that… what’s going on? Why am I not seeing any disclaimers? Also, why am I not seeing anything about how this is a highly high risk type of environment or you’re not giving me my federal and state disclosures? Why am I not seeing that?”
Those type of questions will very quickly percolate whatever nastiness or gross things that are actually lying underneath. That will start to kind of rise to that surface.”
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