Five Common Forex Scams - Introduction
Hi, my name is Rimantas Petrauskas, and I am the creator of this book and video course series “5 Forex Scams Used by Providers of EA, Indicators, and Trading Signals.” In this series of articles, I present my course on how to avoid Forex scams. I will show you what they look like and how they work, so you can have a better understanding and, possibly, avoid falling into traps and losing money.
For those of you who don’t know me, I’m the creator of many MetaTrader apps and tools, such as semi-automatic and manual trading tools. I’m also the co-founder of the Autotrading Academy, where we teach people how to create automated trading strategies without programming. I’m also an expert in automated strategy creation and have created many successful, fully-automated strategies. Finally, I’m a just regular guy who has been scammed in Forex a lot. I’m sure that most of you have also been scammed in Forex. But before we discuss Forex scams in detail, I will share my story.
How I started out in Forex
I began trading in 2008 – the irony is that I found out about Forex from a software scam promising millions in months or days. I fell for it. Over the years, I spent a lot of money on such apps. I tested them on real trading accounts, and lost money. I’m sure that many of you have had similar experiences or know people who have. When I speak with other Forex traders, it seems that everyone has lost at least one trading account.
I spent years figuring out how to avoid scams. What I’ve realized is that, for the most part, Forex moves in every possible direction to make every popular strategy a loser. What I’m trying to say is that, for every strategy, there will be days, weeks, months, or years that it performs well. Then it will have flat performance, in order words, not make or lose money, or some. Of course, there will be months when it will lose more and more. If you stay consistent, however, you can see a profit. If you expect profit from the first month, and for every month to come, that’s just silly. Don’t believe promises that a trading robot will make you millions.
After losing a few trading accounts, I could have concluded that Forex trading itself is a huge global scam. However, I doubled my account twice in a two-year period, and doubled even more accounts since then. In fact, I have doubled countless accounts – I don’t even remember the exact number. Once I started making money from trading, I realized that Forex trading is not a scam. And yes, there are legitimate products for Forex traders – I will discuss those later in the article.
I want to emphasize that scams are everywhere, especially in the wealth and health niches. There are so many “magic” powders, pills, and pants promising that you will lose weight by eating a lot of food! I lost 30 kilos a few years ago, and it was hard! I had to balance my diet and work out 30-60 minutes three or four times a week for months.
No magic powder made any difference for me; I had to put in the hard work. It’s the same in Forex. Forex trading itself is not a scam, but be aware that most people won’t tell you the truth if they’re trying to sell you a product. Some people sell things that they don’t know will fail, while others sell things that do not work or exist – those are pure scams. Let’s have a closer look.
Please continue reading or watch Scams Are Everywhere Video #1
Common Forex scams and how to avoid them
- People don’t tell you the truth
The first case is when people do not tell you the whole truth – they show you a few winning trades to fool you. For example, the screenshot below shows three trades with profits of 39, 111, and 101 PIPS. No one knows what the rest of the trades were.
A website may show a few such pictures or just one. Even if you see 10, 20, or 30 winning trades, it means nothing unless you can see the entire trading history. The image below shows three trades in one day, within a few hours. In 3 hours and 38 minutes, there were 5 more trades that made 274 PIPS profit. It doesn’t make sense because, again, they don’t show the whole picture. We need to see all their trades for the past 6, 12, 24 months – 100 trades at least.
If you see at least 100 trades and most of them are winning, that’s a good enough reason to believe that the strategy will work. If you see a few winning trades and all the losing trades are hidden, it’s clear that they are not telling you the whole truth.
The above image is taken from another website selling a trading strategy. They show only one trade from 2010 with a profit of 90 PIPS! We don’t even know if there was a trade or they simply inserted these arrows and numbers claiming that it was a good trade. It’s not clear. Basically, they are selling the trading strategy with this one picture; it makes them look silly. I doubt anyone would believe this, but you should be aware of these things.
After spending a few minutes on Google, I found this picture from another website that sells trading signals.
They claim they made $30,000 in less than 15 minutes. It’s unclear whether this is real or a demo account, whether these are fabricated or trades from real accounts. Also, the trades are from 2009, years ago. We can see lot sizes doubling, so it means they are using some kind of Martingale trading strategy, which is always very, very risky – I would never recommend that to anyone. It’s funny to see these things.
What’s even funnier is that they show the pound-Swiss franc pair with different price formats, sometimes a four-digit and sometimes a two-digit format. The two-digit format is typically used for Japanese yen pairs. It looks so stupid but people can be fooled if they don’t know these things. It’s important to know what to look for and be aware that most people won’t tell you the whole story.
Many strategies do win sometimes. So what? Not a big deal! These are a few strategies that I created, tests that I ran for extended periods of time. As an expert in this area, I’m always testing thousands of strategies. Right now, I probably have more than 2,000 trading strategies in my dedicated server, testing them on demo and real accounts, observing what works, what doesn’t, and so on.
As you can see in the above image, one of my trading strategies made a profit of 611%. In one month, it turned a $33 account into $200 – yes, it was insane but not the whole story. The strategy blew the account a couple of days later, and all $236 was lost. In this screenshot, I purposely did not include the next few days to illustrate that you shouldn’t believe everything you see.
On the bottom of the same image, you can see one screenshot that shows a growth of 76% in the first few months. In the next one, you can see that it keeps losing for years. If I showed you only the first few months, it would look like a good strategy, wouldn’t it? Even from such a strategy, one can grab screenshots of a few winning trades to make it look good.
- People don’t know the strategy will fail
Sometimes people don’t know whether and when the strategy will fail – this is something that I experienced first-hand. A few years ago, when I was presenting one of my trading strategies and selling trading signals, I made a lot of money for my clients and myself. Everyone was happy. The strategy worked from 2011 to 2015 but stopped working at the end of 2013. I had to move the money between different accounts and so on. Basically, on one broker, it was working better and, on others, not that well. It started to fail in 2014 and hasn’t recovered since.
I ended up closing that strategy and my signal service. That was a hard pill to swallow. It was a difficult time for me, and a hard decision to make, but I couldn’t lose my clients’ money or my own. However, I had the best intentions and always made disclaimers that there are no guarantees. I made sure that people understood that the strategy could fail and that they were risking their money. People still put their money into it and made a lot. I was never called a scammer because I was honest; I never hid anything.
- People sell things that do not work or even exist
The third case is people selling things they know do not work or don’t exist – these are outright scams. For example, they may show results from strategy “A” to fool you and then sell you strategy “B” instead. This happened to me a few times, and it’s not a good experience. I felt so stupid. I had found a great strategy with good Myfxbook results and rushed to buy it. Over the next week, I realized that the results did not match the strategy on Myfxbook. The trades did not match; nothing matched. It was a totally different strategy. Realizing that I got scammed, I did a Google search. It turned out that Myfxbook results were from a different website, but I was sold god-knows-what trading bot.
The image below shows a few examples from a binary options signal site. Here, they show around 12 winning trades and expect people to believe that they will make millions. Show me the last 100, 200, 300 trades and I’ll decide whether it looks good or not. If you show only 12 winning trades, and hide the rest, it means nothing.
You should also be aware of repainting indicators on MetaTrader. Those things do not work. Avoid the illusion of a perfect indicator on MetaTrader. These arrows look good – we have blue and red movements that look nice and smooth. You imagine that you’ll get all this profit.
The image below shows this one trade that you ride. It looks like profit, but we don’t know how many PIPS that was, maybe 50 or 60. However, all these trades made you lose around 40 PIPS, plus you must also factor in the commissions and spread difference. It might end up that you’ve barely covered the expenses of the previous trades.
What I have to say about manual traders who close positions earlier because of trading stops or because they panic is that, after all these losing trades, they don’t expect it to drop that much and they might close somewhere over there and end up in total loss. So it’s just an illusion of a perfect indicator.
Legitimate forex products
Now that we’ve had an overview of the scams and how to spot them, let’s look at the legitimate products.
- Semi-automated or manual trading tools
Semi-automated or manual trading tools are usually legit. You can use them; apply them to your everyday trading or trading technique. They are not some magic that will make you money – you are actually doing the work. You just need a little help, so you don’t have to spend 24 hours a day in front of the computer.
- MT4 Apps on Marketplace
Most Apps on MetaTrader Marketplace are legitimate. Obviously, there are many trading tools – these are fine, but there are also things like indicators and trading strategies, automated expert advisors, for example. Most may work, and some may not. The important thing is that they always show the results – they have to. Marketplace doesn’t allow you to promise millions and forces you to show the results. If you show bad results, no one will buy your product. So if you’re selling something, you will show good results only if it works. If it works, then it’s a good product. It’s that simple.
- Verified, audited strategies from reputable traders
Verified and audited strategies from reputable traders are legit. I’m sure you’re familiar with guys like Jarratt Davis and Andrew Mitchem, but there are many others who teach Forex trading. If they are verified, audited, and have strategies, such traders have had personal success. They work for hedge funds and so on. They’ve been doing this for years with good results. Basically, they know what they are doing. It’s always a good sign if a reputable trader is involved.
- Automated trading robots
The fourth category is automated trading robots. Obviously, good, legit trading bots do exist, but always use them with caution. If you decide to purchase and use a trading bot after you’ve made sure that the website is not a scam, remember that you are risking anyway. Even if it has astonishingly good results, it can fail anytime. Make sure that there’s a money-back guarantee, that it’s showing good results, and that there’s some logic behind the strategy. If you don’t know how something works, how it will trade with your money, or how it will work in your account, don’t buy it. Don’t ever buy anything that is touted as a “secret.”
In this article, I have given an overview of common Forex scams, as well as legitimate products. In the next article, we’ll take a closer look at how to identify Forex scams.Editor's Note: The original video on this page was produced by Rimantas Petrauskas. The text version was prepared by the FPA. The text follows the primary concepts in the video, but has a number of differences in wording.