Bad Bots

When I began the discussion of technical trading systems or “intelligent” software, AKA “bots,” it drew attention from various areas.  One of the more intriguing was a message from Bryan Sayers of

Having spent years at various banks with foreign exchange operations, I was not aware that the world’s most active market (by dollar volume) had any room at all for fraud, unless you count those great money laundering opportunities from Kenya.

Silly me.

Anywhere money is moving and “news” is happening will provide an opportunity for fraudsters to dust off and update one of the classics.

Apparently, that’s happening in forex, with trading “systems” offered for sale by outfits in dubious jurisdictions.  Who knows, maybe these companies are cyber-wraiths, resident only in the chinks between servers, like that great character in the Matrix series that runs the subway system.

Anyway, Bryan provided an article on a kind of fraud in forex land.  I’ve edited it lightly for meaning, (showing my edits in brackets [..], and offer it to you as a lesson in the reality that every profit opportunity will generate its fair share of scams.

As a new [forex] trader you think that you can just start from day one and be successful. You can think that as long as you are making money consistently and have a system that works.

Sadly there are many people who don’t even want to try and learn to trade for themselves, instead they go out and buy a program off the internet that promises to make them money.  I think we have all learned in life that there is no such thing as a free lunch.

This is the same with [extracting] money from the markets, [since] there is no system that [is offered for sale] that will guarantee you fortune. All that is behind these bad robot scams are great sales people and a fancy web page that gets your attention. A lot of these scams target the people who want to open a forex account. These robot scams promise that while you sleep the money will be delivered into your bank account without a flaw.

Let us all pray for those now who are taking out their credit cards, giving up a week’s pay for a forex system that they are told is worth its weight in gold.

I just hope that as a new rookie trader you do not take the reviews on these sites seriously. If you truly believe that someone out there bought these forex robot systems and wrote a review you need to go back to high school. These reviews are just a marketing technique that will get a few more copies sold for them.

Of course the web page will say that it works, they can’t tell you that you might lose money. If there was a [50/50] chance that you [w]ould lose money then you would never fork out a few hundred dollars to get it.

Most of these systems probably just use moving average crosses to generate buy and sell signals. If those who bought these systems had read [the literature on] technical analysis and forex markets before [taking] out the credit card, [they] would find out that [such a] system is easily accomplish[ed] by using any forex broker’s software.

My advice to anyone who thinks they need to waste money on a forex system that they found online is this: first buy forex and technical analysis books from and read them.

You can buy used book[s] for as little as five to ten dollars that will not only educate you on how the markets behave, but will save you the possibility of feeling like an idiot for giving some company money for a system that is junk. These companies are probably not even based in the United States, so if you give them your credit card number and they take your money, you have little to no chance of getting it back if you complain.

These are not real traders who are selling you systems. These people do not have reputations to uphold to others in the financial services industry. They are just scam artists who give you a product that will more than likely lose your money.

Like I said in the beginning there is no such thing as a free lunch. You must put in time and effort by reading and education yourself if you want to trade. Then you will be able to create your own system that does work, and not try [to take a short cut] by buying one found [by] searching the internet.

PS from Howard:

The more sophisticated among this class of trading “systems” will use real data from five, ten or twenty years prior, and simply fit a polynomial or matrix or wave solution to that data, which then will show a monstrous profit if history could somehow exactly repeat itself.

Needless to say, it doesn’t.

In order for a buyer to be initially happy, all that needs to happen is to have trends or cycles the market is exhibiting continue for a while after the new software owner puts them to work.

I liken this kind of trading to driving a car exclusively by looking in the rear-view mirror.  Almost all the time you stay on the road.  Only when you get to the cliff or the sharp curve does a system like these lead you into a world of pain.


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