Forex Robot Scams
For anyone who is looking to automatically trade forex, they will come across forex robots. Whilst these may seem like an attractive proposition for users who do not have the time or skills required to trade forex manually, there are many forex robot scams to try and avoid. This does not mean that all forex robots are a scam, but there are certain things that you can look out for to try and avoid wasting time and money on forex robots that just do not work. I will point out the advantages and disadvantages of automated forex trading and provide some tips on how to avoid scam forex robots.
What are forex robots?
Forex robots are automated forex strategies that can analyse currency pairs for trading signals based on an underlying algorithm. Once the bot finds a buy or sell signal, it can enter a position in the market and manage it on behalf of the user without them needing to do anything. All you need to do is take a few minutes to setup the forex robot on your trading platform and choose the settings you would like it to use.
Most forex robots already come with preoptimized settings and setup instructions to make it quick and easy to get started. This makes them popular for beginners which unfortunately means there are lots of forex scammers that try to take advantage of them with poorly coded robots and false claims. If you know what to look for and have a particular forex strategy in mind, there are forex robot that work, it just takes some time to find them.
What are forex robot scams?
When talking about a forex robot scam, I am not referring to forex robots that have bad results. This is because any manual or automated forex strategy can go through good and bad periods. I do think that some traders are too quick to call forex robots a scam because they didn’t make a million overnight. They need to be more realistic with their expectations and understand that losses are a normal part of trading and investing.
For instance, let’s say that there is a forex robot which has had a good year with some respectable gains but then had a losing year following on from this. For arguments sake, we will say that the winning year was twice as good as the losing year meaning that the robot is still up overall. A trader who began using the forex robot at the start of the first year will probably be very happy. The trader who started using the robot during the 2nd year may be screaming “it’s a scam” at the top of their lungs.
Of course, nobody can 100% predict what will happen in the future and there are also other factors that can have a significant impact on robot results including the current economic climate and broker trading conditions. I have seen the exact same forex robot give a completely different set of results simply due to the brokers spreads and commissions. Does this make it a scam? No, I don’t think so.
In saying that, I think a forex robot scam is those which claim you will make “x amount” over “x period of time”. I would be wary of anyone promising a specific amount of returns because this is trading and anything can happen. If someone had a crystal ball and could predict the future, I doubt they would be selling a forex robot.
Then you have those forex robot scams where the developer shares false accounts. They may try to pass demo account results as real account results. This could be because the forex robot just does not perform on a real account. I have also frequently come across forex robot scams where the developer is working alongside a suspicious brokerage firm that give them unrealistically favourable trading conditions so they can cross promote each other. Traders buy the forex robot thinking it works well whereas the broker gets clients who want trading conditions they cannot have access to.
The worst forex robot scams of all are perhaps those where you simply do not get anything. These are rare from my experience and outright fraud. It involves someone saying you will receive a forex robot if you make payment only for them to disappear when you do. It takes a bold and cold criminal to do this, but it is not unknown for scammers in the forex industry to just disappear off the face of the earth once they have your funds. Go careful out there and only look for trusted providers with some history and genuine reviews.
How to avoid forex robot scams?
There are plenty of things that you can keep an eye out for when trying to avoid getting caught up with a scam forex robot. As I said, not all forex robots are scams but if you take the following into consideration, you can possibly reduce your chances of making a bad selection.
Verified results
Check to make sure the forex robot has real results that have been verified by a third-party service such as Myfxbook. Even then, I have seen scam forex robots that publish fake results. As the old saying goes, if something looks too good to be true, then it probably is.
The longer the robot has been running, the better. If there are multiple forex accounts showing results across different forex brokers, this can give some more reassurance. I would certainly want to see a forex robot with results on some of the best forex brokers to help make sure that they are as realistic as possible.
Backtests
Although historical results are by no means any guarantee of what will happen in the future, back tests can help to give you an idea of how a forex robot trades. If a forex robot does not have any back tests then I would be questioning why straight away. It could be because the results are so bad and the developer does not want to share them.
That being said, I would at least expect back tests on all of the currency pairs and chart timeframes that the forex robot has been programmed for. Ideally, back tests should span at least a few years to see how the robot held up through different market conditions.
Just keep in mind that back test quality can be limited. If you are looking at an MT4 forex robot, then you might want to check the back-test modelling quality is at least 99% for the most accurate test conditions possible.
Back testing should account for spreads, commission and slippage. These can all have a big impact on results but many developers choose to ignore them simply because they want back tests to look more impressive. Some forex robots would fail miserably if these factors were accounted for, especially forex scalping robots which can be so spread dependant.
Money management
A forex robot is not a scam because it has bad money management, but this does mean that it could be dangerous. If the robot is using any potentially dangerous martingale or grid trading strategy, you should be aware of the increased risk that this can create. More often than not, these types of forex robot end up with huge drawdowns which can cause a margin call and blown account. Even if the results look good at the moment, disaster could be just around the corner.
If a forex robot needs to use risky money management, it is usually because the implemented trading strategy is not a good one. For instance, a forex robot with a stop loss of 100 pips and take profit of 10 pips would need a very high win rate. It would only take on bad trade to wipe out 10 winners, and that’s not even including brokerage fees.
For me, I like an automated forex trading system that has a tight stop loss and uses dynamic money management to try and make the most out of each move. I find that fixed stop loss and take profit levels can be rigid at times. The market is constantly evolving so a robot that makes decisions based on price action and technical analysis for money management can sometimes have an edge.
Trading strategy
I touched upon this in the money management section above, but I think it is important to try and find out as much as possible about the forex trading strategy that the robot is using. For example, if you are using a forex scalping robot that requires tight spreads and low commission fees, then you might need a specific broker in order for it to fulfil its potential.
Even if the robot is not broker dependant, I would look to see if the strategy is consistent. Some forex robots are optimised across certain data which means that they can be “curve fitted” without any logical strategy behind them. A robot developer might just throw a lot of indicators and settings together to optimise and then take the best results.
I would prefer an automated trading strategy that uses the same settings on all currency pairs that it trades because for me that shows there is some logic and consistency behind it. I believe this is better than throwing what you can at the wall and hoping something sticks.
User feedback
Another way to try and avoid forex robot scams is to see what other users have had to say. If nobody has received the software, that is an obvious sign of a scam. If some users have had bad results then that doesn’t automatically make it a scam. In that case, you might want to take a look at back tests and real results as far back as they will go to see if it is something that would meet your needs.
I have known of users to buy forex robots, change all the settings, run them on the wrong currency pairs, have a losing trade and then call the forex robot a scam. I don’t think anything can beat trying a forex robot that you are interested in yourself.
There are free forex demo accounts which can be a great way to try out forex robots using virtual funds to see how they perform without any risk. Just be aware that demo accounts do not always take into account liquidity, slippage and real spreads. Therefore, they cannot fully duplicate performance from a live trading environment.
Do forex robots work?
Yes, forex robots do work but that does not mean you will have good results. There are so many different factors that come into play when trading forex using any strategy. This includes broker conditions, market scenario and user inputs.
There are unexpected news releases can have a huge impact on the market. I have seen good forex robots crash and burn because of black swan events but then you do have some which are using dangerous money management which could have been avoided. Whilst this does not make it a scam, you might want to avoid such robots.
Conclusion: are all forex robots a scam?
No, I have spent almost 20 years developing and testing forex robots and I can tell you from experience that not all forex robots are scams. Yes, some are better than others, but a forex robot having some losses does not make it a scam. This is trading and there is always risks involved.
It is impossible to predict the future but we can limit losses and manage expectations by doing some proper research and choosing a forex robot with settings that meet our individual preferences. Please feel free to browse my best forex robots for some inspiration if need be.
You will probably come across some obvious forex scams along the way, but just use your common sense and follow some of the tips that I have outlined above to try and steer well clear of deliberate forex robot scams. Always test forex robots on a demo account at first to see how things go.
If you experience some losses when using a forex robot, do not immediately assume it must be a scam. If you are the type of person to do this, then perhaps you may wish to consider learning how to trade forex manually so that you can learn from your mistakes and become a better forex trader in the long run.
Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more. I share my knowledge with you for free to help you learn more about the crazy world of forex trading! Read more about me.
