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Red flags in trading promotions

The SECThe US stock market regulator.'s investor alert on social media fraud lists signs like these:

• Promises of high returns with little or no risk. The SEC calls these 'classic warning signs of fraud'.
• Screenshots of fast-growing accounts. These are often fake.
• Paid testimonials and celebrity endorsements. Sometimes actors pose as ordinary people who became millionaires.
• Pump and dump. ScalpingA trader taking very small, very quick profits.: someone recommends a stock, then sells into the rise. Touting: paid promotion that isn't disclosed.
• 'Pay taxes or fees first' before you can withdraw. Don't put in more money to get money out.

The CFTCThe US regulator for futures and derivatives. warned in January 2024 about AI trading bots and signal schemes. If they promise high or guaranteed returns, that is a red flag. AI cannot predict future market moves.

In the UK, the FCA's guidance FG24/1 says finfluencers must not promote regulated financial products without approval.

Day-trading courses often promise you can trade 'for a living'. Chague, De-Losso and Giovannetti tested exactly that claim on Brazilian futures day traders. For almost everyone, it did not hold. See How do retail traders actually do?.

Related

• How do retail traders actually do?
• Survivorship bias
• P-hacking and data snooping

Sources & studies

1. SEC: Social media and investment fraud – investor alert
2. CFTC customer advisory on AI trading scams (Jan 2024)
3. FCA FG24/1: Finalised guidance on financial promotions on social media (PDF)
4. Chague, De-Losso & Giovannetti, Day Trading for a Living? (SSRN 3423101)

Gurus: facts and fablesHow do retail traders actually do?Survivorship bias

Last checked: 2026-11-04 · Educational, not financial advice.

Education only, not financial advice. No signals. Backtests are hypothetical: real trading can be worse. Past results don't predict future results.