In the stock market, there are rules and regulations for everything, including algo trading software but the worst part is there is small group of traders who are aware of these regulations.
And those unaware people are the one who fall victim in one or the other stock market scam.
Now, if we discuss about Algo Trading, there are multiple rules & regulation and One of those regulations states that algo trading software must be registered and certified by the stock exchange.
Now, honestly, how many of you were aware of this? Probably very few, if any.
We often see algo trading software as just another tool for trading, requiring our attention. You trade using SEBI-registered stockbroker platforms, right? So, if you lose money due to any scam, glitch, or misinformation by the broker, you can report it to SEBI.
When using algo trading software, you are still trading, but the trades are automated rather than manual.
So, why do most of you not consider checking its registration and certification?
Your little negligence makes it easier for scammers to loot your hard-earned money. The worst part is that, in such cases, even market regulators may not be able to provide you with complete support.
We came across one such case, where an experienced trader, Shashank (name changed), first paid ₹50,000 in fees and then faced a loss of more than ₹50,000 in algo trading. Here is what actually happened:
ADB: Hello, Mr. Shashank. I came across your complaint. Kindly provide details of what actually happened.
Shashank: Sir, I have been trading in the stock market for the last 2-3 years, but I am still not profitable. I am also added to different WhatsApp and Telegram groups by my friends.
About a year ago, I was added to a group where the admin used algo trading software. One day, I received a personal message on my WhatsApp from that group admin.
He told me about his algo trading software and the different plans available. I didn’t have enough funds, so I didn’t show any interest.
But he kept sending me profit screenshots every day. That caught my attention, and I decided to buy one of his plans.
ADB: Okay, so what were the plans?
Shashank: He was offering three different plans, and the minimum plan was ₹10,000. I decided to buy that plan, but he asked me to buy a bigger plan to gain more profit.
ADB: What did he say?
Shashank: He asked me to buy a plan worth ₹50,000, claiming there were better returns as the algo uses a multi-leg strategy under that plan.
I arranged the money from my friends and paid him the amount. I also added ₹50,000 to my trading account.
ADB: Did you share your credentials with him?
Shashank: Yes, he said he would handle my account completely. Initially, I made a profit. After every profit, he asked me to add more funds. I thought the software was working, so I kept adding more funds.
But one day, he opened 2-3 different positions, and in a few hours, all my capital was wiped out. I was left with ₹1500 in my account.
I changed my password as he was not stopping from taking positions.
ADB: Did you contact him?
Shashank: Yes, I contacted him and said that since I am not satisfied with his service, I want a refund of my fees. But he denied and later blocked me.
ADB: Sorry to hear that. Now, the last question: Was the algo trading software registered with the Exchange?
Shashank: No, sir. I was not aware of this initially. Later, when I checked, I found that it was not a registered software.
ADB: In that case, you cannot claim a refund of your losses. However, you can reach out to SEBI to claim a refund of the fees amount. If you need help in filing a complaint, you can contact us.
Shashank: Sure, sir. Thank you for guiding me.
So, what can you learn from Shashank’s case?
- Always check the registration details of trading apps or software.
- Never be influenced or convinced by someone to trade with capital that you cannot afford to lose.
- Most importantly, avoid those who ask you to share your account details for trading.
