Beware of MetaTrader Scammers!

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In our previous lesson we discussed how it is possible to develop a profitable trading system that can be taught to people who know nothing about trading. We also gave you a MetaTrader robot that implements a much simplified version of that "Turtle trading system", together with backtest results to show that it can be profitable. You may possibly have noticed that there are a lot of other people who are trying to sell you MetaTrader robots, and their websites proudly display backtest results that show amazing profits. Today we want to explain one reason why you shouldn't necessarily believe all that hype.

Here's how the basic boiler room scam works. Some unscrupulous fellows obtain your contact details from the list of stockholders of a large and reputable corporation. Then they call you on the phone and try to use their silver tongues to sell you some snake oil disguised as an IPO or a penny stock that they will assure you is just about to head for the stratosphere.

A more complicated variation of this scam involves first gaining your trust by sending you predictions about stock market movements of well known corporations by direct mail or email. The scammers send out lots of mail. Half say Microsoft is going to go up. The other half say Microsoft is going to go down. Depending on which way Microsoft's stock moves one of those halves get a second mailing. Half say Google is going to go up. The other half say Google is going to go down. Can you see where this is going yet? The people who have received correct "predictions" about both Microsoft and Google receive a third mailing. Half say IBM is going to go up. The other half say IBM is going to go down. After a few such mailings a small proportion of the people on the original mailing list have received a series of apparently 100% correct predictions. They are the ones that then receive the call advising them to purchase the stock of Acme Inc. at a bargain basement price.

The latest variation on this age old ruse uses a similar technique to perform tests on MetaTrader Expert Advisors that apparently show outstanding results. The truth is rather different! A quirk in the way MetaTrader displays the results of a robot's automatic trading activity allow the scammers to display the results of only their winning trades. All they have to do is to program their robot so that it never closes any losing trades. These robots let all their losers run!

For an in depth analysis of how this is achieved take a look at our first example of a scam robot. Here is an extract from the results of our first backtest of this unscrupulous expert advisor:

# Time Type Order Size Price S / L T / P Profit Balance
1 2009.05.04 00:00 buy 1 0.10 1.32818 0.00000 0.00000
2 2009.05.04 00:00 modify 1 0.10 1.32818 1.27793 1.33318
3 2009.05.04 00:00 sell 2 0.10 1.32793 0.00000 0.00000
4 2009.05.04 00:00 modify 2 0.10 1.32793 1.37818 1.32293
5 2009.05.04 02:40 t/p 1 0.10 1.33318 1.27793 1.33318 50.00 10050.00
6 2009.05.04 02:40 modify 2 0.10 1.32793 0.00000 0.00000
7 2009.05.04 02:40 buy 3 0.10 1.33346 0.00000 0.00000
8 2009.05.04 02:40 modify 3 0.10 1.33346 1.28321 1.33846
9 2009.05.04 02:40 sell 4 0.10 1.33321 0.00000 0.00000
10 2009.05.04 02:40 modify 4 0.10 1.33321 1.38346 1.32821
11 2009.05.04 09:29 t/p 4 0.10 1.32821 1.38346 1.32821 50.00 10100.00
12 2009.05.04 09:29 modify 3 0.10 1.33346 0.00000 0.00000
13 2009.05.04 09:29 buy 5 0.10 1.32816 0.00000 0.00000
14 2009.05.04 09:29 modify 5 0.10 1.32816 1.27791 1.33316
15 2009.05.04 09:29 sell 6 0.10 1.32791 0.00000 0.00000
16 2009.05.04 09:29 modify 6 0.10 1.32791 1.37816 1.32291
17 2009.05.04 12:25 t/p 6 0.10 1.32291 1.37816 1.32291 50.00 10150.00
18 2009.05.04 12:25 modify 5 0.10 1.32816 0.00000 0.00000
19 2009.05.04 12:25 buy 7 0.10 1.32287 0.00000 0.00000
20 2009.05.04 12:25 modify 7 0.10 1.32287 1.27262 1.32787
21 2009.05.04 12:25 sell 8 0.10 1.32262 0.00000 0.00000
22 2009.05.04 12:25 modify 8 0.10 1.32262 1.37287 1.31762
23 2009.05.04 14:40 t/p 7 0.10 1.32787 1.27262 1.32787 50.00 10200.00
24 2009.05.04 14:40 modify 8 0.10 1.32262 0.00000 0.00000
25 2009.05.04 14:40 buy 9 0.10 1.32816 0.00000 0.00000
26 2009.05.04 14:40 modify 9 0.10 1.32816 1.27791 1.33316
27 2009.05.04 14:40 sell 10 0.10 1.32791 0.00000 0.00000
28 2009.05.04 14:40 modify 10 0.10 1.32791 1.37816 1.32291
29 2009.05.04 15:15 t/p 9 0.10 1.33316 1.27791 1.33316 50.00 10250.00
30 2009.05.04 15:15 modify 10 0.10 1.32791 0.00000 0.00000
31 2009.05.04 15:15 buy 11 0.10 1.33344 0.00000 0.00000
32 2009.05.04 15:15 modify 11 0.10 1.33344 1.28319 1.33844
33 2009.05.04 15:15 sell 12 0.10 1.33319 0.00000 0.00000
34 2009.05.04 15:15 modify 12 0.10 1.33319 1.38344 1.32819
35 2009.05.04 17:04 t/p 11 0.10 1.33844 1.28319 1.33844 50.00 10300.00
36 2009.05.04 17:04 modify 12 0.10 1.33319 0.00000 0.00000
37 2009.05.04 17:04 buy 13 0.10 1.33886 0.00000 0.00000
38 2009.05.04 17:04 modify 13 0.10 1.33886 1.28861 1.34386
39 2009.05.04 17:04 sell 14 0.10 1.33861 0.00000 0.00000
40 2009.05.04 17:04 modify 14 0.10 1.33861 1.38886 1.33361
41 2009.05.05 07:54 t/p 14 0.10 1.33361 1.38886 1.33361 50.00 10350.00
42 2009.05.05 07:54 modify 13 0.10 1.33886 0.00000 0.00000
43 2009.05.05 07:54 buy 15 0.10 1.33358 0.00000 0.00000
44 2009.05.05 07:54 modify 15 0.10 1.33358 1.28333 1.33858
45 2009.05.05 07:54 sell 16 0.10 1.33333 0.00000 0.00000
46 2009.05.05 07:54 modify 16 0.10 1.33333 1.38358 1.32833
47 2009.05.05 10:29 t/p 15 0.10 1.33858 1.28333 1.33858 50.00 10400.00
48 2009.05.05 10:29 modify 16 0.10 1.33333 0.00000 0.00000
49 2009.05.05 10:29 buy 17 0.10 1.33886 0.00000 0.00000
50 2009.05.05 10:29 modify 17 0.10 1.33886 1.28861 1.34386
51 2009.05.05 10:29 sell 18 0.10 1.33861 0.00000 0.00000
52 2009.05.05 10:29 modify 18 0.10 1.33861 1.38886 1.33361
53 2009.05.05 18:21 t/p 18 0.10 1.33361 1.38886 1.33361 50.00 10450.00
54 2009.05.05 18:21 modify 17 0.10 1.33886 0.00000 0.00000
55 2009.05.05 18:21 buy 19 0.10 1.33356 0.00000 0.00000
56 2009.05.05 18:21 modify 19 0.10 1.33356 1.28331 1.33856
57 2009.05.05 18:21 sell 20 0.10 1.33331 0.00000 0.00000
58 2009.05.05 18:21 modify 20 0.10 1.33331 1.38356 1.32831
59 2009.05.06 02:22 t/p 20 0.10 1.32831 1.38356 1.32831 50.00 10500.00

Pretty impressive for only 2 days work, wouldn't you agree?

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