Posts Tagged ‘scambots’
Forex Scams and Scambots
July 16th, 2009
Not every Forex EA (robot) or trading method will perform well all the time. Not every under performing Forex robot is a bad robot and not every bad robot is a scambot or part of a Forex scam.
The biggest problem at the present time seems to be there is too much hype surrounding each and every new Forex product. Too many sales pages and reviews are built around sales psychology, click through rates, maximum conversions (sales). Making the sale is all that matters. After the sale is made, there often little or no support and the buyer is pretty much on their own. A churn ‘em and burn ‘em mentality. So long as you don’t outright lie on the sales page then who cares right? Wrong!
Hiding amongst the endless pages of sales hype and template reviews, lurk the real Forex scammers. One scam technique would seem to be to release a Forex Robot with a trading strategy that is designed produce a very good win rate (good for the sales page) on a demo account with the recommended broker. Only to lose massively once trading begins on a live real money account. Preferably wiping the entire account out in a spectacular disaster. While the customer can refund the robot there are no refunds on the money lost from the trading account.
Virtually all Forex robot creators will recommend one or other Forex broker and there is nothing wrong with that. It is simply they may receive a commission for refering a new client. However a potential problem arises when the recommendation is based on commissions rather quality. One of the great advantages of Forex robots on the Metatrader platform, is you are free to use your robot with almost any broker of your choice. Choose a broker that is based and regulated in your own country or choose from one of the major brokers such as Alpari, IBFX, FXDD etc.
Sales hype is probably a bigger problem than outright scams. Almost every cheap robot seems to be marketed on win rates but optimizing for a high win rate often results in lower long term profitability. For example with a small take profit target and loose stop loss, you are almost guaranteed to win every trade. However when you do take a loss, it will likely wipe out all your recent gains and more. That is not a strategy for long term success.
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