Beware of MetaTrader Scammers!

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:

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