You will find a possible UGLY TRUTH of how with some
craftiness one can make practically any trading robot perform with such trading
results to make the best professional traders in the world green with envy. You will understand why selling trading
robots is a potentially very profitable business. Consequently, you will be able to see
marketing campaigns for trading robots in a new light.
do we get for trading results of trading robots?
Have you ever seen a marketing promotion for a trading
robot? The promise of trading results (fantastic profits in the shortest period
of time) is head spinning.
Have you ever gone to check the web site in the
promotion? If you have you saw many charts as proof of successful trades. All
those charts could be bogus. This is why buyers of trading robots demand to see
So trading robots promoters show trading results from
their DEMO accounts. But those could also be forged. This is why buyers of
trading robots demand to see trading results by logging into the trading
So some trading robot promoters allow you to log into
their account. And some (very few but nevertheless!) allow you to check their
LIVE trading account.
That surely cannot be forged as you will be able to
see with your own eyes the trading record in that account which produces the
fantastic results. Something like this surely cannot be a scam! Right? WRONG!
Before we reveal how these things could be achieved
first consider the information in the next section.
funds use a trading robot?
What is a hedge fund?
Wikipedia says: “A hedge fund is an investment fund that can undertake a wider range
of investment and trading activities than other funds. … Some hedge funds have
a net asset value of several billion dollars…. The estimated size of the global
hedge fund industry is US$1.9 trillion.”
The yearly ROI of hedge funds is nothing mind boggling
and stays well below 100% which is the so much dreamed about ROI of FX traders:
to double the money in a year! Furthermore, in 2011 the average yearly return of the hedge funds was negative. (source:
Amazing, would you agree? Despite all the
supercomputers and hoards of analysts with PhD in mathematics and applied
physics hedge funds on average could not beat the S&P index.
Now consider this: How much do you think a hedge fund
would pay for a trading robot that makes not 100% per month but say “only” 10%
per month? Such a robot would enormously increase the hedge fund’s ROI and
hence its equity.
Such robots for Forex trading start from $97. I can
firmly state that for sure there are at least a few released per week because
I get their marketing promotions into my mailbox. With so many robots which on
paper perform so incredibly well don’t you think a hedge fund would buy one or
two? And if they bought those robots do you think that the robot price would be
Granted, a hedge fund cannot trade like a retail trader
so they cannot use the trading robot the way it is sold. But still, don’t you
think that out of all the hundreds of new trading robots released every year hedge
funds would find one or two suitable for their trading strategies?
A rather logical answer is: Yes, if those robots
worked. But in most cases those trading robots are a waste of money and in many
cases a scam.
they make a trading robot perform so well?
A note of
caution first. I am not saying that what you will read here happens out there plus the explanation is SIMPLIFIED.
I have no tangible proof and I don’t intend to search for one. I am simply asking
you to expand your frame of thinking to see what COULD be possible and then
decide for yourself.
The approach is very simple. Let’s explain it with the
use of two accounts.
In the first account the robot enters trades as prescribed by its algorithm. In
the second account the robot enters at the same time in the opposite direction.
Where is the stop loss positioned? This is the beauty of this approach. There is no stop loss. As you are 100%
hedged, whatever the price is doing in one account the exact opposite is
happening in the other account. So if one account is losing 10 pips at a
particular point in time the other is winning 10 pips at the exact same time.
We set the robot so that it exits when a certain
profit in pips is reached. When in one of the two accounts we get the targeted
profit, in the other account we get the same amount of loss. So we
theoretically have always the same amount of money in the accounts as when we
How does the
practical world of trading affect the described approach?
In practice this approach doesn’t work so easily.
There is a cost of doing this, at least the spread and the commission (with an
ECN broker). Plus the slippage if we do this in a LIVE account.
Also, it is difficult to make things work very well
with only two accounts. For example: it is possible that both accounts
oscillate around the initial amount because the trading parameters are such
that in the current market there is no profit.
How do you improve the chance of not getting stuck in
such a scenario?
Imagine you had $50.000 and were in the business of
selling bogus robots. You could divide $50.000 into 20 accounts of $2500. Then
you do what was described above but now with 10 account pairs for hedging and
thus 10 possible trading parameter combinations. There is a reasonably high
chance that one of these accounts will produce a very good profit.
Of course, if you want to show proof with a DEMO account then sky is the limit. You set up as many account pairs as you want
with as many parameter combinations and voila! With one of them you surely get
a trading record out of this world.
By the way, have you ever seen proof of robot
performance in a LIVE account of $50,000? I haven’t. Mostly they show you DEMO accounts but if they show you a LIVE account then it has only a few thousand
dollars in them.
Isn’t it interesting? The creators of a robot which
makes say 100% or whatever per month trade with only a few thousand dollars in
a LIVE account, foregoing huge profits each month. It doesn't make a lot of sense!
profitable could be the business of selling bogus robots?
The cost of doing this depends upon the trading strategy,
how much of the profit is eaten up by the spread and the commission and more. But
let’s simplify things a bit so we can show what could be going on.
Let’s say that 10% is spent on the spread, the
commission and the slippage per account. By the way, if you were doing this
professionally I guess you would open all these accounts via an introducing
agent and would get 50% of the commission back thus lowering the commission
The cost of running this elaborate scam with $50,000
is therefore $5,000.
How many robots would you need to sell to be
profitable? The price of robots varies but if we assume a price of $100 then 50
is the answer.
Here is the big question: do you think you could sell
100 robots all over the world with proof of fantastic performance on a live
account? This would give you revenue of $10,000 and the profit of $5,000. So
you invest $5,000 to get $5,000. A 100%
You can have for example one such marketing action
each month, selling a different fantastically performing robot. Each month you
make 100% on your investment.
So yes, such robots are great performers. They can
produce 100% profit or more per month. Unfortunately not for their buyers but
for their creators and sellers.
robots work or are they a scam?
There are HFT (high frequency trading) firms that run
only machine based trading and are very profitable according to reports. So
trading robots definitely work.
Also, not every trading robot is a scam. There are
honest development teams around who endeavour hard to come up with trading
robots that work well.
However, unfortunately the following is probably true:
Many trading robots don’t work (as expected) and there are trading robots
(sold to the public) which are a SCAM.
Once you see the world of trading robots from this
perspective you may look at marketing campaigns for selling trading robots from
a different angle. You may even SAVE some money BY NOT BUYING a bogus robot.