The Dark Reality of Finfluencers Which Traders Generally Follow

In recent years, the rising prevalence of social media platforms has resulted in an interesting phenomenon — the advent of ‘influencers.’ A portmanteau for financial influencers, these social media stars offer ‘free advice’ on investments, trading, investments, financial trends, money management techniques and so much more.

While these videos and reels may be viral, they often run the risk of masquerading personal opinions and impersonal suggestions as believable facts. In many cases, you can even find trading tips and bold claims of how the share market or certain stocks may move in the future. Unfortunately, most of these stock market recommendations are rarely rooted in facts. If you follow this misleading information, you’re more likely to end up in the red, just like many others before you.  

Earlier this year, the Securities and Exchange Board of India (SEBI) took cognizance of this issue and stepped in to tighten the regulations surrounding the registration of such influencers. To ensure the integrity of the financial markets and protect investor welfare, the market regulator mandated that influencers must register with SEBI, disclose their qualifications and potential conflicts of interest, and refrain from making misleading or fraudulent statements.

Despite these regulations, the influence of influencers on traders’ decisions remains significant. Worryingly, many traders do not critically evaluate the information provided by influencers, making them vulnerable to misinformation and potential financial losses.

Decoding Deception: Reasons to Steer Clear of Finfluencer Guidance

As a trader, you need to properly understand the impact of the misleading information shared by many influencers. Let us dissect the top reasons you shouldn’t be making trading decisions based on the advice or opinions offered on social media.

  • They are not Registered Financial Advisors

First, let’s get the most important thing out of the way. Most social media influencers are not SEBI-registered investment advisors. This makes them unqualified to give any kind of financial advice, trading calls, or recommendations. It is illegal for anyone outside of SEBI-registered advisors to offer such advice.

  • They can Inadvertently Impact Stock Prices

Another crucial aspect to consider is the unintended effect influencers can have on stock prices. When influencers urge traders to take positions in certain stocks, it could shift demand and lead to price disruption. Ultimately, it’s often retail traders like you who end up incurring heavy losses, while the influencers profit off commissions.

  • They Offer Generic and Unrealistic Opinions

Any kind of financial or trading advice must always be tailored to your style and preferences. However, influencers often give generic opinions that are often highly unrealistic and overly optimistic. So, they are almost always not tailored to your online trading patterns or performance in any way.

For instance, let’s say you’re an options trader and an influencer you follow recommends investing in equity stocks. This might have little to no value for you at best. However, at worst, it may encourage you to trade in the equity segment instead of the derivatives market, where you tend to have higher success.

Enhance Your Trading Performance with the New-Gen App from Samco Securities

As a trader, it is quite natural for you to want to improve your trading performance. The key to doing this is recognizing and implementing strategies that work for you instead of relying on generic observations. Here’s where Samco Securities can help.

Through our new-gen trading app, we offer unique and personalized insights designed to help you become a better trader. One of the key features in the Samco trading app — aptly named Andekha Sach — gives you access to crucial hidden truths about your trading performance. These truths and analytics are starkly different from the sweeping statements shared by influencers online.

From the Common to the Customized: Explore Andekha Sach with Samco’s ‘My Trade Story’

Under the My Trade Story section in the Samco trading app, you can find crucial analytics that break down your trading performance. Using a proprietary data engine, the app analyzes billions of data points related to your past trades to generate useful information that can help you become a better trader.

Let’s examine some of the hyper-personalized hidden truths that you get with the Andekha Sach feature in the new-gen trading app from Samco Securities.

  • Unseen Insights

The Andekha Sach or unseen insights lets you know the hidden truths about your trading performance. This helps you identify areas that need improvement based on your historical trading patterns. The feature even gives you actionable suggestions that you can implement to enhance the success ratio of your trades.

For instance, let’s say that you’re an options trader and most of your loss-making trades are due to large position sizes. In addition to marking this hidden truth as a red flag, you will also receive actionable suggestions to reduce your position sizes and set up stop-loss orders to minimize the downside risk.

  • Strike Rate

The strike rate is another useful insight you get in the Samco trading app. It indicates just how profitable or loss-making your trades are. For instance, say you make around 150 trades in the derivatives market during the month. If 97 of these trades are profitable, your winning strike rate would be about 64.6% (97/150), whereas your losing strike rate would be 35.4% (53/150). Being aware of the percentage of trades on which you make losses can help you identify your shortcomings and plan your trades better.

  • Average Profit and Loss Size

The average profit/win size indicates the average profit you generate per trade. The average loss size, meanwhile, indicates the average loss per trade. The new-gen Samco trading app lets you check the average win and loss sizes at the sectoral, strategic, and market-cap levels. Knowing these details can help you determine which of your strategies are working and which ones need to be modified.

For instance, say your average win size when executing a long put options strategy is 40%, and while executing a short call is 55%. This may indicate that you are more successful or experienced at short-call options trading, but your long-put strategy may need improvement.

  • Samco Trade Score

The Samco Trade Score is a unique metric that indicates just how successful you are in your trades. A trade score less than 1 indicates poor performance, a score ranging between 1 and 3 indicates average to good performance and a score over 3 suggests that you’re fairly successful.

  • My Trade Spreadsheet

You can find another great set of unseen insights under the My Trade Spreadsheet section of the new-gen Samco trading app. The most advanced trade book ever, My Trade Spreadsheet is a unique feature that provides crucial trade-related analytics for every trade to help you understand your trading patterns and discern areas where you can improve.

Here’s a quick overview of some of the key unseen insights you get under this section.

  • Trade Level Insights

Every trade you make is categorized into one of four actions:

  • Fresh initiations
  • Average up, down, or at cost
  • Partially booking winner/loser
  • Fully unwinding winner/loser

Such categorization gives you the intent behind each trade you make, so it’s easy to determine how effective or not it is. For example, if the trades where you average down often end up in huge losses, it may indicate that the strategy isn’t very effective.

  • Market Trend Level Insights

The trade vs trend feature under the Trade Spreadsheet section gives you insights into what the market trend was when you executed a trade. It effectively classifies every trade into one of the two types — aligned with the trend or against the trend — so you can assess your performance when going with or against the trend.

For instance, if the average profit size is the largest when your trades are aligned with the trend, it indicates that you’re more successful when following the stock market and that you should continue doing it in the future.

  • P&L Analytics

Under the P&L Analytics section of My Trade Spreadsheet, you get detailed insights like maximum possible gain (MFE), maximum possible loss (MAE),  and P&L w.r.t the benchmark, among others. You can use these metrics to assess your trading performance and make necessary adjustments to your strategy accordingly.

Make Trading Decisions Backed by Data With the New-Gen Samco Trading App

With influencers, you rarely get data-oriented opinions. Fortunately, that’s not the case with Samco. Our new-gen trading app is powered by a proprietary and sophisticated engine capable of processing millions of data points to provide valuable insights based on your past trading performance. With the Andekha Sach feature, you can learn from your trades and make calculated decisions that are in line with your goals.

In addition to the trade-related insights and metrics, you also get various other features when you open a trading and Demat account with Samco. This includes leveraged products like CashPlus, which offers up to 4X delivery margin, and StockPlus, which lets you avail margin against your shares. And the best part is that you get all of these features and more at no additional cost. So, switch to Samco Securities, open a demat and trading account with us, and download our app today to get unlimited access to all these features and more.