Investment funds

“It is not a criminal offense, but it does lead to loss of money among young people.” — © Screenshot Instagram

Stock market watchdog FSMA warns about the risks associated with the activities of prop trading companies, or companies that defraud through shadow investing. Young people in particular come into contact with it through social media. “It is not a criminal offense, but it does lead to loss of money among young people.”

Imagine: you can invest. What’s more: you can do it better than any bank or professional. All you have to do is invest a few hundred euros in an online course and pass the exam. First you do simulations to become confident and then you are allowed to invest with the organization’s money, so to speak, and you can earn a commission. That’s what prop trading companies promise, but it’s absolutely not true. “They sell dreams,” says stock market analyst Stefan Willems. “They make consumers believe that they can become successful stock traders, but the consumer is also partly the product.”

The companies, such as FTMO and FundedNext, are very active on social media. They try to scam new people through advertisements on YouTube, tweets from users and Instagram profiles with ‘testimonials’. And young people in particular fall for this. “In 2023, we received 993 complaints and questions about prop trading. That is a lot,” says Johan Corthouts of the stock exchange watchdog FSMA. “Most complaints came from younger people, under 30. That is why we now want to warn about the risks of those prop trading companies.” (Read more below the photo.)

Beursanalist Stefan Willems — © Dirk Vertommen

Risks

That risk mainly lies in creating the illusion that you can get rich quickly this way. “The danger lies in the fact that they can play on those simulation sites themselves, and therefore engage in shadow investing, possibly with good results,” says Corthouts. “Then you become overconfident and start trading in real life, usually with a bad outcome.” And that’s not all, Willems adds: “The amounts you could possibly earn are not worth the time and money you put into the course and training.”

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The companies that offer the courses do not require a permit at all. “These are often just marketers and traders who make it look much better than it is,” says Willems. According to the stock market analyst, the alarm bell should go off from the moment they promise you that you as an individual could do better than the bank or large stock exchange houses. According to Corthouts, it is not really fraud. “It is not punishable, but it does lead to loss of money among young people,” he says.

Anyone who trades has a good chance of losing, according to Willems. “Trading, which pursues profit in the very short term, ends in losses on the stock market for 90 percent of people. If it were really that easy, everyone would do it and be rich. People can certainly achieve great results on the stock market, but then you have to invest for the long term. If you want to get started, you can first practice with a dummy account and then start carefully with small amounts.”

FundedNext is a proptrading platform — © Screenshot Instagram

A tweet from someone trying to recommend FTMO to other users. — © Twitter

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2024-03-09 16:52:49
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