MC Explains: The (fake) P&L screenshot debate that has traders divided

Over the last couple of years, many self-proclaimed market experts have taken to sharing screenshots of their portfolios/ trading positions on social media platforms. Often, these screenshots are faked with the aim of making the expert appear skilled at trading or identifying stocks, while the reality is altogether different.

This issue is also at the heart of the controversy finfluencer PR Sundar finds himself in after a vulgar tweet in response to a fellow tweeter, who challenged Sundar about the veracity of his trading claims.

Moneycontrol takes a close look at what the debate is all about.

Why do traders post screenshots of their profit & loss (P&L) statements?

Some just want to show off. But the majority of those who post such screenshots have an ulterior motive. The idea is to sell subscription services (stock tips) or technical analysis/derivative trading workshops to people who are new to investing. And since moderate gains are unlikely to impress potential customers, the figures are edited either by use of photoshop or changing a few lines of HTML code, to make the profits look outsized.

Do such schemes find takers among the public?

By the hordes. The near one-sided rally in share prices from March 2020 to October 2021 has had retail investors, many of them first timers, rushing to trade in shares and equity derivatives. This is evident from the surge in the number of trading accounts at broking firms and in demat accounts. The experts charge anywhere from a few thousand rupees to tens of thousands, depending on the complexity of the subject. Retail investors often get impressed by the tall claims made in the screenshots.

Are such courses/workshops illegal?

The courses/workshops in themselves may not be illegal, but if the expert has falsified data to attract people, there is an element of fraud there. The economics of such workshops are juicy. An expert charging Rs 20,000 for an online workshop can make a cool Rs 10 lakh over a weekend if 50 people sign up. People join such courses/workshops thinking they can become expert traders quickly by learning a few concepts. The joke in the market is that most experts offering such services make more money from teaching than they can ever hope to make from actual trading.

Are these sessions of any value at all?

That is subjective. The content may be genuine, but one can’t become a skilled trader overnight by memorising a few concepts and strategies. It takes years of practice to become a good trader or an investor. That is particularly true of derivatives trading, which involves many hard-to-understand technicalities. Besides, if these strategies can help make millions, as the trainers claim, why are they sharing their trade secrets for a few thousand rupees and inviting competition?

Interestingly, traded turnover in index and stock options has risen 5-10 times since March 2020, while turnover in the cash market has just about doubled. Brokers say that most new investors are dabbling in index and stock options, convinced that it is easier to make money in them. The market moves over the last couple of years has only strengthened that belief.

What about stock tips services?

That’s the more dangerous bit, and run largely by fraudsters claiming to be investment experts. For a couple of thousand rupees a month, you get to become part of Telegram or WhatsApp channels on which stock tips are given daily. Most people who join such services become victims of a pump-and-dump scheme operated by the organisers of the channels. The fraudsters take up positions in a stock or options contract and then advise their subscribers to buy those. The price rises when all the subscribers rush to buy the stock, helping the operators unload their positions. SEBI has cracked down on a few such channels, but there are simply far too many of them for the regulator to keep track of.

Can the claims made by these so-called experts about their MTM gains be verified?

Fintech firm Sensibull has come out with a facility whereby traders wanting to post screenshots of their P&L can have it verified by Sensibull. The way it works is that Sensibull has tie-ups with various brokers, and so can verify the claims by accessing the data from the broker’s back end.

But brokers can verify such claims themselves...

Yes, but brokers may not have found it worthwhile to invest time and resources in creating a mechanism that at best would be a public service. Secondly, many of these experts or finfluencers refer customers to brokers. So, it would be a conflict of interest as well.

What is the market saying about verification of P&L accounts?

The views are divided. For one, traders put out screenshots of their open positions, which are profitable. But prices could change by the time the trader decides to book profits. So, even if the P&L is verified at a certain point, it is not a given that the trader would have made as much of a profit. Second, there is also the possibility of traders cherrypicking their best trades and posting them, so as to exaggerate their trading skills.