Fake pnl of live trading: Finfluencers scam

[Chirag1]

@nithin just wondering, in what range do the referral commissions run into. just a ballpark average for say the top 10 payouts in a year for Z?
Is it very sensitive to share? Thanks

[Rajath_Bhat]

What if Brokers/SEBI implement a rule that the referral income can be used to offset the referrer’s brokerage charges only?

[nithin]

@Zodiac

Can we have one more option for displaying Zerodha’s customer ID?
In case someone wants to display only ID.

Hmm… the client ID isn’t something that we want people to be sharing publicly.

[nithin]

@Chirag1

@nithin just wondering, in what range do the referral commissions run into. just a ballpark average for say the top 10 payouts in a year for Z?
Is it very sensitive to share? Thanks

Ah yeah, we don’t want to talk about this publicly.

[nithin]

@Rajath_Bhat

What if Brokers/SEBI implement a rule that the referral income can be used to offset the referrer’s brokerage charges only?

Hmm… then why even have a referral program? The idea of a referral or partner program is to be able to acquire new customers without any upfront costs and more importantly give another reason for your customer to spread the word.

[Chirag1]

@nithin

Ah yeah, we don’t want to talk about this publicly.

thats understandable.

It was only bcos Revenue at 5500 Cr and say 10% gross referral at 550Cr and 10% brokerage sharing would be like 55 Cr for last payout (FY23)
Bcos the number was a bit astronomical, i thought a real estimate is logical.

[leoindra86]

Hi Nitin,

Out of many reasons finfluencers scam - two major are - 1) fake pnl 2) exploitation of affliated links.

more concerned on 2nd option, this income with affiliated links needs to reduce, for Zerodha it’s 10%, have seen other’s brokers where its 50%.

• What happens when user doesn’t follow that ‘fininfluencer’, the account cannot be changed.
• another one - why doesn’t the brokerage sharing percentage reduces by every year, it stays on as long as the user stays.

[HIMANSHU_GUPTA]

@nithin legally, only RAs and RIAs are allowed to sell advisory. But they aren’t to take the same trades. So P&L verification of their account will not work. We need a platform which tracks the recommendations of RAs and RIAs.

This is what we are doing at verifiedstockexperts.com

Would love to get your feedback on the platform.

Thanks

[nithin]

@leoindra86

Hi Nitin,

Out of many reasons finfluencers scam - two major are - 1) fake pnl 2) exploitation of affliated links.

more concerned on 2nd option, this income with affiliated links needs to reduce, for Zerodha it’s 10%, have seen other’s brokers where its 50%.

• What happens when user doesn’t follow that ‘fininfluencer’, the account cannot be changed.
• another one - why doesn’t the brokerage sharing percentage reduces by every year, it stays on as long as the user stays.

On your 2nd point, the new SEBI consultation paper is for addressing that. As I mentioned right at the start, sub-brokers, APs, Referrers, Remisiers have all existed from the start of Indian capital markets. There has never been a separate categorization for Finfluencers and they have ended up getting conflated with one of them listed above. A separate type of regulation is required for them and that is what SEBI is trying to do.

[nithin]

@HIMANSHU_GUPTA

@nithin legally, only RAs and RIAs are allowed to sell advisory. But they aren’t to take the same trades. So P&L verification of their account will not work. We need a platform which tracks the recommendations of RAs and RIAs.

This is what we are doing at verifiedstockexperts.com

Would love to get your feedback on the platform.

Thanks

I just checked the landing page of the platform. There are a couple of issues with this.

1. If you list the person who generates the maximum % return, the incentive for the advisor/analyst will always be to take the highest risk to provide the highest return. This isn’t ideal for most retail investors. If you did have to list, maybe the right way is by Sharpe ratio and not % return.

The Sharpe ratio compares the return of an investment with its risk . It’s a mathematical expression of the insight that excess returns over a period of time may signify more volatility and risk, rather than investing skill.

2. The most significant issue when an individual or multiple advisors/analysts are giving many buy or sell signals is to figure out which ones to act on. If you as a platform are going to do a % return of all alerts provided by the advisor, it isn’t really of any help since the user can’t be buying/selling every single piece of advice. So what is helpful when it comes to advisory is to help a person decide what % to allocate to which advice and how to manage it afterwards. Just listing many stock buy and sell tips isn’t useful, at least in my experience.

[raoawesome]

@Sleepy_Weasel

There are thousands of folks entering trading world coz of these YouTubers/ traders who are basically scamming tier2,3 city folks by selling dreams and while doing so these guys show live fake screenshots or live fake pnl’s of zerodha … shouldn’t there be responsibility of zerodha as well from ethical point of view to expose such scamster who have lakhs of followers and claims crores of profit while using zerodha and they earn money with sub- brokerage as well by sharing zerodha links

Those thousands of folks that enter trading world because of youtuber/traders/influencers with no level of testing(both backtest & forward test) and neither evaluate themselves from psychological standpoint and literally jump into stock market with live money. There is a term for that and that is called as dumb money.

Yep , that’s the dumb money floating around the stock market . Nithin never told you straight forward but I am telling you because you see even if you get strategy/methods with irrespective of verified or fake P&L , it is due diligence of individuals to test it thoroughly(both backtest & forward test) before trading with live money. I would even go step further that they should have a small account to blow up just to overcome psychological hurdles of deviating from money management, dealing losses psychological , revenge trading etc.

You shouldn’t be trading with live money if you don’t have personally tested plan at hand irrespective of methods/strategies. period!

As far as scamster earning money via sub brokerage. Well its business. And secondly who complains if there is more dumb money entering the market . It benefits everyone.

And lastly, this stuff you are noticing, its not like its only there in stock market, its there outside as well especially in real estate and these days among farmers & vegetable traders that go around hoarding & dumping and doing what not. The other day in news I saw a farmer dump of his entire produce of tomatoes on road because the price of tomatoes crashed. I don’t know if it was a farmer or trader,(I think it is trader). but you get my point right. All these are quite common in speculation markets.

[Pratik6]

Hello Sir

Previously you have mentioned that success percentage of profitable trader is just 1 percent
So in that 1 percent what would be the ratio of sellers and purely naked option buyers

And

Two doubts

1. Is it difficult to be profitable in naked Option Buying consistently because technically its not possible wherein the system is such that option buyer cannot be technically profitable over long run like casino system

OR

2. The level to achieve the skill is so very difficult that people fail to succeed… but its still possible with greatest of discipline perseverance and dedication

[Kranandv]

@nithin
I want your attention in below 2 points which is defeating the purpose of your new implementation of pnl link. As influencer are still showing customised dates profit.

1. I see links of some users who had earlier set customised date for pnl is still showing profit of that specific range.
2. You have given checkbox for live/not live but if someone get good profit in any 30 days he/she generate link on that day and then after he will not update link and show that old profit all time.

[Abhishek_Srivastava]

@nithin Hi, non related to PNL, but since talk about client I’d took place here, for privacy, can you please hide user id and rather replace it with client’s initials, whenever we log in in Kite?

Atleast in Web version.

Thanks!

[leoindra86]

thanks, is there a way to check whether account is opened by affiliated links and if opened by, strip out the brokerage sharing.

[HIMANSHU_GUPTA]

1. Completely agree. This is like the v1 of the platform, where we track the realtime performance of expert’s recommendations using live market data. This only covers return% for now. There are various metrics we can add on to this incl returns% of clients, max up/drawdown%, profitable week/month%, etc. The end goal is to have 2 combined scores - one for Returns, and another for Risk - similar to a google review or zomato rating.

Note: Sharpe ratio will not work well here as we offer F&O as well as EQ advisory.

2. Yes. This problem can be broken into multiple subparts:
   a) Finding the ‘best’ advisor for the customer - not just in terms of return% but one that suits their trading/investing style (Eq/FnO, investment horizon, capital, risk appetite). This comes from the investor profile and their past transaction data
   b) Ensuring fast execution: We have integrated WhatsApp alerts here, as well as direct broker linkages for execution
   c) Managing exits: Exit alerts are automatically generated once the target/sl is hit. Or update alerts if the expert updates the exit conditions.

One challenge that remains is the % allocation. For RIAs we can solve that, but with RAs that will continue to be a challenge due to regulatory constraints. But solvable to some extent with proxy indicators (Strong Buy, Strong sell,…) .

Would love to discuss this in more detail. Have dropped you a mail with more details.

Thanks a lot!

[nithin]

@Pratik6

1. Is it difficult to be profitable in naked Option Buying consistently because technically its not possible wherein the system is such that option buyer cannot be technically profitable over long run like casino system

OR

2. The level to achieve the skill is so very difficult that people fail to succeed… but its still possible with greatest of discipline perseverance and dedication

I had shared this post sometime back.

Option buying: The riskiest trade out there

1. The way most people trade options, that is, risking more than 5 to 10% of capital on every trade, definitely reduces the chance significantly of making profits from trading by buying options. The issue with buying options is that you are always just one incident away from blowing up the capital. So unless someone ensures the max loss is defined by risking only a small portion of the capital, it is unlikely that person can generate profits in the long run.

2. Skill + Discipline+ Perseverance + luck as well.

[nithin]

@Kranandv

I want your attention in below 2 points which is defeating the purpose of your new implementation of pnl link. As influencer are still showing customised dates profit.

1. I see links of some users who had earlier set customised date for pnl is still showing profit of that specific range.
2. You have given checkbox for live/not live but if someone get good profit in any 30 days he/she generate link on that day and then after he will not update link and show that old profit all time.

hmmm… ideally if someone is sharing an old verified P&L link and is claiming profitability, the audience should demand the latest P&L The dates are clearly mentioned on them.

[nithin]

@Abhishek_Srivastava

@nithin Hi, non related to PNL, but since talk about client I’d took place here, for privacy, can you please hide user id and rather replace it with client’s initials, whenever we log in in Kite?

Atleast in Web version.

Thanks!

hmm… we will speak about this internally. @MohammedFaisal + +

[nithin]

@leoindra86

thanks, is there a way to check whether account is opened by affiliated links and if opened by, strip out the brokerage sharing.

We are waiting for the regulations to come up from SEBI on this. My guess is that this will also be a requirement. Unless there is a regulatory requirement, hard for us to do this as of now.