One of the traps the forex robot buyer can fall into, in fact probably the worst and most persistent trap, is that the seller really doesn’t care if it works or not. All they care about is convincing you to buy it.
To do this, they will usually give some sort of “evidence” that their automated trading system makes money. These claims range from the pathetic, supposed screenshot of their account on which the robot is running, to a (usually much better) Myfxbook account which is linked to the robot account.
The problem with the screenshots of accounts, spreadsheets and so on should be rather obvious in this day and age. It’s absolute child’s play to fake these kinds of results.
Reasons Why Forex Robots Fail
So, is a Myfxbook account (or one of the many alternatives to Myfxbook) absolute proof that their system works?
I used to believe it gave a pretty good indication. Then I heard about vendors who would generate literally hundreds or even thousands of robots running on individual demo accounts. At the end of 3 to 6 months, they would pick the one or two that performed best over that period and promote them with verified Myfxbook accounts for ‘Proof’.
Obviously, the chances of striking a couple of systems that perform profitably for a few months, out of such a massive sample of systems, is reasonably good. It doesn’t mean any of those systems will continue to perform consistently over the long-term. It is just that out of all the combinations of parameters the robot designer has used, this particular combination or combinations is working well at this point in time.This is one of the many ways forex robot vendors can cheat: by hiding their thousands of failures.Click To Tweet
In this scenario, the buyer of the forex robot thinks they’re dealing with someone who knows what they’re doing, without seeing the thousands of failures the seller has pulled the plug on.
I often get emails from people who tell me they just bought a robot from a website that looked “pretty good”. But when they start trading the robot on their own accounts, the performance in no way matches what the vendor was claiming as normal. The vendor websites rarely pass close scrutiny. Even if they do provide a Myfxbook account that shows an interesting equity curve, when you dig into the statistics of losing months, overall drawdown and so on, few of them are as attractive as the hype makes them out to be.
So what can you do to avoid being ripped off?
How to Avoid the Worst of the Robot Scams
There is no entirely foolproof answer. Aside from knowing and trusting the vendor, you are left with the option to buy or not buy. One good plan is to make note of the robots that seem interesting, and follow their fortunes for several months to see if they remain consistent. After this evaluation period, if you are comfortable with the way they trade, go ahead and make the purchase. Even then, my advice would be to run it on a demo account only, for at least three months, before you risk real money on it.
As many of you know, I am working on a number of forex robots myself. At this stage, I have about 30 possible strategies that I am running on demo to evaluate over the next few months.
I’m still looking for the best broker to use for this, so I haven’t fully set it up yet. When I do, I could post the results for everyone to follow along and see how they are performing. I don’t have any expectations of success at this stage; as I said I’m still in the very early evaluation phase. But it should be a bit of fun. So let me know if you would like to see the Myfxbook accounts posted here for you to follow. Leave your comments and feedback below.
Just before we leave the subject of cheating forex robot vendors, I should also mention Tradeproofer’s post on here a few months back. In it, he explains how and why some robot vendors approach brokers with a deal. That deal entails the vendor being able to manipulate the robot to the brokers ‘requirements’ for profit.
In other words, the vendor says to the broker “just tell me how much commission you’d like to earn, and I’ll adjust the number of times the robot trades accordingly”. It’s an interesting read, and bound to make you think twice about buying a forex robot through a brokerage. You can read more here (but please come back and post your comments on THIS post):
Take Care & Trade Well,