For some time now, some influencers have been known to use their status to promote investments and training programmes in online trading. But despite these endorsements, it is important to remain cautious. Advice that may seem well intentioned can hide real scams. With any type of investment, it is important to remain vigilant and aware of risks and potential losses. It is also essential for traders (amateur and professional) to be able to differentiate scams from legitimate trading platforms.
Influencers’ role in online trading scams
Some influencers have been seen to promote social media accounts that have helped “hundreds of people quit their jobs and make money from home” through training programmes in currency trading. Such endorsements have come under fire for promoting trading techniques that are not suited to amateur investors as they are considered high-risk – risks that these influencers failed to disclose…
Online foreign exchange traders @elliottrades and @tradelikebecksfx have millions of Instagram followers and have received endorsements from prominent celebrities from reality TV shows Geordie Shore and Love Island. Said celebrities staged themselves monitoring charts and supposedly receiving guidance from (invisible) FX traders. Most of these celebrities failed to mark these posts as “paid partnerships”, despite the Advertising Standards Authority (ASA) making it mandatory for influencers to use the #ad hashtag whenever they were paid to promote a brand or product. But what is more worrying is that they have been promoting unregulated day traders without mentioning potential risks and losses that are very real factors in the investment world.
Chris Elmore MP has criticised the lack of awareness of these types of practices in the following statement:
"Barely a week passes without another example of murky practice on social media platforms being unearthed. The issues surrounding celebrity and influencer endorsers in the beauty and diet industry are well-documented, but there has been surprisingly little coverage of their role in promoting high-risk investments."
Similarly, the City watchdog has warned that celebrity influencers had been promoting currency and crypto-currency trading schemes which later turned out to be scams. It is estimated that victims lost a total of £27m between 2018 and 2019.
Rule #1 of trading: nothing is ever 100% risk-free
The key lesson here is that despite celebrities endorsing risk-free, quick and easy investments, they simply do not exist. It goes against the very nature of trading and investments. One needs extensive knowledge of how trading works in order to minimise risk.
For instance, Bitcoin is a highly volatile type of investment. Risk management is of the utmost importance, because the payoff can be big, but so can the loss.
Likewise, it is very unlikely that you will succeed in winning large sums of money very quickly, simply by having trained in trading for a short amount of time. Online trading is certainly accessible to everyone. However, it requires thorough knowledge of the financial markets.
A successful trader should be able to choose a strategy and have a general understanding of market mechanisms and fluctuation factors. By launching quickly and without a safety net, it is highly unlikely that you will ever succeed in online trading, contrary to how easy influencers make it seem.
If you are serious about trading and investing, most online brokers offer free and effective training tools according to their level of knowledge of the sector. These could be webinars, trend analyses, how-to guides, and so on. There are many resources out there that will help you understand how online trading works. Most trading sites also offer free trials through demo accounts. This gives you an opportunity to familiarise yourself with the trading world, using a predefined credit before using your own savings.
Therefore, we can only recommend going through well-known online trading sites rather than trusting people who have very little knowledge of this area but who nevertheless claim to have earned large sums of money in record time. Of course, we understand the appeal, but beware of scams and fraudulent systems promoted by influencers, who now have a real power to cause damage thanks to their social media platforms.
