How to Check Out Day Trading Service Providers before Buying
Trading software, training, and research services for day traders can get expensive, and some are outright scams. Even those that are legitimate (and most are) may not be right for you. Before you spend your money, do your research. Start with the free programs offered by the exchanges so you have enough knowledge to understand what a trading services purveyor is trying to do. Then check them out.
You have a ton of tools available to you to do your due diligence. A good place to start is the Internet. Go to your favorite search engine and enter the name of the program you’re looking at plus the word scam or rip-off and see what turns up. If nothing of much interest turns up, proceed to the regulatory agencies.
Anyone with even a little knowledge of search-engine optimization knows this tip. If your search turns up 50 blog posts with lines like “Why Company X is NOT a scam!!!” well, guess what? Company X probably has something to hide. Or just move on, because plenty of legitimate vendors that you can work with instead are out there.
You may learn very little about any given research firm from an Internet search or checks with the different regulatory organizations. That doesn’t mean the firm in question isn’t for real, just that it hasn’t caused any concerns so far.
Commodity Futures Trading Commission
The Commodity Futures Trading Commission regulates options and futures markets, which are popular with day traders. Although not as well known as the Securities and Exchange Commission, its functions are similar. At its website, you can check out investor advisories, known scams, and recent enforcement efforts to see whether the vendor you’re thinking of working with is legitimate or too good to be true.
The Financial Industry Regulatory Authority (FINRA) provides a handy service that lets you check on the current enforcement status of different brokerage firms and their employees, especially in the stock, bond, and options markets. Some of these firms and people may be offering research services or newsletters, so check to see whether they’ve had problems in the past. Then you can make decisions based on what you find. Some issues, such as a history of disputes over customer funds, should send you running.
National Futures Association BASIC
Futures are popular with day traders, and they’re regulated by the National Futures Association. Its Background Affiliation Status Information Center (BASIC) gives you information on people and firms registered with the National Futures Association.
Securities and Exchange Commission
The Securities and Exchange Commission offers lots of great information about every aspect of stock and bond investing, with a special emphasis on problems and scams to avoid. Don’t let the information scare you away from the market; use it to evaluate any services that you’re thinking of paying for.