How To Spot A Fake Trading Service
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Mary is a sweet elderly lady who has been my neighbor for almost a quarter century.
She’s an expert seamstress and every birthday since my children were born she’s made them a blanket, or a hat, or socks, or some other personalized present.
In the summer she invites our family over to swim, and in the winter she brings us homemade soups, cakes, and cookies.
In her driveway sits a Mercedes SUV, a classic Karmen Ghia, a Honda minivan, and a 1998 Ford F-150. A custom-built garage on the side of her property holds two pristine, fully restored Model A’s.
I’ve got keys to all of them, along with her house key and alarm code.
We’re about as close as nonrelational neighbors can be.
Last week I got an email from Mary. She told me she was in a jam and wanted to know if I could help her out.
Given our history and our relationship, my response was a no-brainer.
“Go pound sand, Mary!”
They say context is everything so perhaps I should provide some here.
Hello, hope you’re doing fine? Just checking if you can assist on a favor.
Just let me know if we can communicate via emailing.
I left my phone at home! But do have computer to email you here.
This first email was suspect right off the bat, most notably the formatting of the subject line.
Throw in some bad grammar, broken English, and an odd syntax, and my spidey senses started to tingle.
But who knows?
Maybe she’d fallen and couldn’t get up. Maybe she was emailing from the bottom of the stairs, in extreme distress, covered with her own blood, courtesy of a bone protruding through the skin.
Better to be safe than sorry.
Sure, what do you need?
The reply was almost instantaneous.
Thanks for the response, can you help me get Amazon gift cards for my friend, who had Heart operation some days ago. She had lost both parents to the disease (COVID-19). It’s her birthday today but I can't do this right now because I have arthritis in the knees and ankles. I tried purchasing it online but unfortunately I got no luck on that. Wondering if you could get it from any local stores or pharmacy or gas station?
I will reimburse you with the money spent. Kindly let me know if you can handle this.
Now I smelled a rat.
This expansive explanation not only served to amplify the same red flags as in the original message but opened up some glaring plot holes, most notably, Mary has three adult daughters and a gaggle of grownup grandchildren living within a few blocks. One of them would likely have taken care of this way before my name came up.
However, it was the Hallmark Channel-worthy drama that sealed the deal. I can only imagine the conversation in the writer’s room at Scam Central.
“Okay, how about this? She has a friend, who just had heart surgery, and today is her birthday.”
“Hmmm, that’s good, but not compelling enough. What if we were to somehow work in Covid-19?”
‘Right, right. Her friend just had heart surgery, it’s her birthday, AND she’s got Covid-19.”
“No, no, no, you’ve got to think bigger. We’ll never get those precious Amazon cards thinking that way.”
“Wait, I’ve got it…”
Though I was 99% confident in my read, just to be sure I sent another reply.
Do you remember what my kids’ names are?
And lo, there were no more emails from “Mary.”
Not everybody can spot a scam.
I’m pretty good at it but my wife sucks. She’s constantly sending me screenshots from her phone or computer, asking, “is this legit?”
The world of trading is rife with them.
Depending on the source, the numbers aren’t good for traders. It’s estimated that as few as 1% of day traders make money consistently, though I’ve seen numbers as high as 15% for swing traders. Those who I would call “active investors” do slightly better.
But you wouldn’t know it by looking across the landscape of trading services and systems being offered throughout the internets.
We appear to be in a golden age of trading, and not only is everyone killing it, but you can too if you just sign up for the right service.
Problem is, I suspect the vast majority of these trading services are, for lack of a better word, frauds.
And they’re not too hard to spot.
Trading is a constant battle against imperfection. Losing more than you win. Buying too late and selling too early. Re-learning lessons the hard way and fucking up way more than you’d like to admit.
Not the greatest selling points.
That’s why the services in question sell the myth of perfection.
Playing upon both the public’s lack of knowledge and their desire for a sure thing, these services tout their win rates - which always seem to be north of 90% - and peddle products whose bolded names include words like “Winning,” “Success,” “Edge,” and my personal favorite, “Profit Machine.”
You can see the ideal of perfection reflected on their websites, which are clean and elegant, and in their relentless marketing machine, which, should you sign up for their “free” list, will doggedly email you twice daily with “limited time” discount offers and “exclusive members-only insights.”
There’s usually a team of mentors standing by, ready to help you “take your trading to the next level.” And more often than not these services are run by a trading guru, who is not really a guru, because he or she tells you they’re not.
When these self-proclaimed non-gurus aren’t launching new e-books or online courses, they’re speaking at trading conferences, hosting “Master Classes”, and putting out hours of highly produced video on their YouTube channel.
It makes you wonder how they have any time left to trade.
Spoiler alert: They don’t.
Like a shark that will die if it doesn’t keep moving forward, they have to be marketing all the time because subscriber attrition rates for these services are incredibly high.
Sure, they’re making money, but from running a business, not from the market.
How do I know? Common sense.
If you had a system, a methodology, or even a gift that produced consistently high winning rates and outsized returns, why would you offer it to anyone else?
Instead, you’d raise a fund, lock yourself in a room, and coin money all day long.
Or just trade your own money.
Why on earth would someone in this position distract themselves with all the hassles that come with running a full-time business?
Maybe I’m just too cynical?
Perhaps the folks that run these services are just really good eggs. Maybe they want to give back, to pay it forward using their experience and wealth of knowledge. Or it could be that they want to empower people, offering them the chance at a better life.
Fair enough. But then why charge $3,000 for their service?
That’s not a random number.
Those who’ve been around for a while already know where I’m going with this.
I’m going to the 3000 Club.
The 3000 Club was a newsletter launched back in 1981 by Bo Thunman and named after the cost charged by a suspiciously high number of trading services and systems at the time.
As you may have guessed, the newsletter and its devoted readers, most of whom had written at least one $3K check in the past, were dedicated to identifying and exposing trading scams as well as the charlatans who hawked them.
The opposing forces of inflation and commoditization – the low cost and ease with which you can offer a service today – have conspired to keep the cost of today’s trading services remarkably close to the $3,000 mark.
Only now it’s $3K per year.
So how do you protect yourself from fraudulent services?
Successful trading is about consistency, discipline, finding edges, defining your risk, and more than anything else, putting in the work.
There are no shortcuts.
Only pay for tools, never solutions.
That might mean subscribing to a service that provides proprietary data and analysis.
Or one which gives you access to an experienced trader who spends more time in front of his screens than in front of a webcam.
It might mean becoming part of a trading community that helps everyone raise their game.
Or could be as simple as subscribing to a service that inspires and motivates you to get better at your craft.
Of course, most things of value aren’t free, and there are legitimate services that charge a pretty penny. Some are even up in that 3000 Club range.
You’ll have to do the calculations and decide which ones hit your price/value sweet spot.
But what you want to avoid is shelling out big cash to buy a trading course plagiarized from books you can read for free with a library card.
Or paying through the nose to be mentored by someone who makes their living mentoring people.
Or taking a loan out so you can get Premium/Diamond/Platinum level access to a guru who will tell you exactly what to buy, when to buy it, and when to get out.
Pay for tools, not solutions.
It’s not sexy, nor is it exciting or cool.
But it’s the truth.
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It should go without saying - but I’ll say it anyway - all opinions expressed in The Lund Loop are my own personal opinions and don’t reflect the views of my employer, any associated entities, or other organizations I’m associated with.
Nothing written, expressed, or implied here should be looked at as investment advice or an admonition to buy, sell, or trade any security or financial instrument. As always, do your own diligence.