FTC FACTS for Consumers

FEDERAL TRADE COMMISSION

FOR THE CONSUMER

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A dvertisements for some day trading systems or advisory services make investing look like a virtual bonanza where everyone’s a winner.

But if one thing’s certain about stocks, commodity futures, options and similar investments, 

it’s that they’re uncertain. Any company that guarantees huge earnings is feeding you a

load of “bull.”

Day traders spend their time at computer screens, quickly buying and selling investments 

within a single day — sometimes within just a few hours or minutes — and reacting to 

continual market swings. They trade in the hope that their investments will soar in value in the 

short time they hold them, and net them quick profits. Often they use computerized systems or 

advisory services that claim to be able to predict the markets.

INVESTMENT

Day Trading Ads:

Cutting Through the “Bull”
Facts for Consumers

No doubt about it, this is a risky business. Despite 

the picture of investing success painted by some 

day trading companies’ ads, far more day traders 

lose money than make it. Some traders lose 

big, forfeiting their student loan money, second 

mortgages or retirement funds. In addition, people 

who trade on margin or sell short risk losing much 

more than their investment.

Every time investors make a trade, they pay a 

commission. That’s true whether they buy or sell 

and whether they make money or lose their shirt.

Read Between the Lines

Learning the language of day trading can help you 

separate fact from fantasy when reading an ad or 

listening to a commercial.

If the ad promises... “The potential to make a six 

or seven figure annual income from trading is at the 

ends of your fingertips.”

Remember that... It’s dangerous to fall for 

extravagant profit claims. Many are based on 

hypothetical performance, meaning that no trades 

were ever really made. And it’s far from certain 

that a bona fide trader will be able to place the same 

trades as the hypothetical trader. Actual results may 

not match the hypothetical performance — and even 

trading advisors with a long track record of success 

can lose a fortune suddenly.

If the ad promises... “The absolute best trading 

system with a profit-to-loss ratio of 12-to-1 and an 

average return better than 18 percent per trade...”

Remember that... Even if the system really has had 

such successes, past performance is no guarantee 

of future results and nobody — not even financial 

experts — can guarantee what the market is going to 

do from day to day or even minute to minute.

No matter how strong the market may seem and

how solid a particular company may appear, prices 

can skyrocket or plummet faster than you can say 

“Wall Street.”

If the ad promises... “Our software signals 

precisely when to buy and when to sell a particular 

security, allowing you the opportunity to make 

money regardless of the market going up or down...”

Remember that... As tempting as it might be to leave 

your investment decisions in the hands of a software 

program, the ultimate responsibility for protecting 

your investment belongs to you. No matter how 

sophisticated a system for evaluating investments 

might sound, there’s no way to guarantee the future 

performance of investments. If there were, you 

can be sure that the software developers would 

be making their money using their programs 

themselves, not promoting it to others!

If the ad promises... “Our recommendations 

returned an average annual return of 250 percent. If 

you can just follow our recommendations, you will 

make money.”

Remember that... There’s no fail-safe way to 

invest without any risk. High-yield investments tend 

to involve high risk. Be particularly suspicious of 

sales pitches that play down risk or portray written 

risk disclosures as routine formalities. Believe the 

risk disclosures that say you could lose your whole 

investment. Jumping on a “hot” investment tip is a 

good way to get “burned.”

If the ad promises... “Timothy Smith, who used our 

system wrote to us, ‘... at night I work with your 

trading system for a few hours and am averaging 

more than $500 a day.’”

Remember that... Everyone loves a good 

testimonial, but it’s smart to be wary of them. 

The story may or may not be true. And it’s highly 

unlikely that the testimonial reflects the actual 

experiences of other people using the system or 

advisory service — or the result you’re hoping for.
Facts for Consumers

Invest Carefully

Whether or not you’re a day trader, your best 

protection as an investor is to know what you’re 

buying, what the ground rules are when you buy and 

sell, and what level of risk you’re assuming. 

If you decide to do business with a company offering 

day trading systems or advisory services, it’s 

important to check it out before putting your money 

on the line.

• If the trading system involves stocks, call your 

state securities regulator to find out whether 

the company has ever been disciplined or has 

complaints against it. Look in the government 

section of your phone book or visit the 

North American Securities Administrators 

Association’s website at www.nasaa.org. You 

also can get a firm’s disciplinary history by 

calling the National Association of Securities 

Dealers-Regulation Public Disclosure Program 

at 1-800-289-9999 or by visiting its website at 

www.nasdr.com/2000.htm.

• If the trading system involves commodity 

futures or options, call the National Futures 

Association toll-free at 1-800-621-3570 or

1-800-676-4NFA (4632).

In addition:

• Look carefully at the basis for any claims the 

company makes.

• Talk to other traders who have used the 

company.

• Check out the company with the Better Business 

Bureau and the local consumer protection 

agency.

To File a Complaint

The FTC works for the consumer to prevent 

fraudulent, deceptive, and unfair business practices 

in the marketplace and to provide information to 

help consumers spot, stop, and avoid them. To file 

a complaint or to get free information on consumer 

issues, visit www.ftc.gov or call toll-free,

1-877-FTC-HELP (1-877-382-4357);

TTY: 1-866-653-4261. The FTC enters Internet, 

telemarketing, identity theft, and other fraud-related 

complaints into Consumer Sentinel, a secure, online 

database available to hundreds of civil and criminal 

law enforcement agencies in the U.S. and abroad.

To file a complaint regarding a commodity futures or 

options investment, contact the Commodity Futures 

Trading Commission toll-free at (866) 366-2382, 

complete an online complaint form at www.cftc.gov, 

or write: Commodity Futures Trading Commission, 

Division of Enforcement, Three Lafayette Centre, 

1155 21st Street, NW, Washington, DC 20581.

To file a complaint regarding a stock investment, 

contact the Securities and Exchange Commission by 

phone at (202) 942-7040; online at

www.sec.gov/invkhome.htm; or by writing: 

Securities and Exchange Commission, Office of 

Investor Education, 450 5th Street NW, Washington, 

DC 20549-0213.
Facts for Consumers

Federal Trade Commission

Bureau of Consumer Protection

Offi ce of Consumer and Business Education

May 2000

FEDERAL TRADE COMMISSION

FOR THE CONSUMER

1-877-FTC-HELP

WWW.FTC.GOV