In this article, I will talk about the second type of Forex scam - forex signal services scam. Please don’t get me wrong: I’m not saying that every signal service you find online is a scam – my intention is to provide some clarity by showing you how to identify Forex trading signal scams and how to determine whether a signal service is worth following. I will also demonstrate how bad signal providers can make thousands in PIPS in minutes and verify this with Myfxbook results. I know this sounds impossible, but it’s actually very easy to do to fool traders.
How to identify Forex signal scams
- No third-party verification
The first sign that a signal service is a scam is that they have no verified results on Myfxbook, ForexPeaceArmy.com, or similar websites, like FXBlue.
If they show only backtests, MetaTrader4 statements, and monthly stats in PIPS, these things don’t count unless they are verified by Myfxbook or ForexPeaceArmy.com. So if there is no third-party verification, do not trust backtests or statements. It’s ridiculous how easily such things can be fabricated.
I’ll present two examples. For the first one, I did a quick Google search and came across a signal website, which I will not name, in the top 20 results. It’s a shame that such websites rank so high in Google searches when reputable signal providers don’t get a decent ranking.
In any case, the signal service I am using as an example does not provide Myfxbook results. Their stats are not verified by anything or anyone. As you can see in the first line in the above screenshot, they claim that on September 28 they made 9 PIPS on EUR/USD, 21 PIPS on USD/JPY, and more on other pairs, with a total 62 PIPS; however, we don’t know how many PIPS they lost before they made those 62. They claim they make a profit on every trade and rarely incur losses. Even if they have a losing day, they don’t have losing months. All this is extremely suspicious and not verified, so don’t waste your time and money.
The above screenshot is an example from a different website – this one is even funnier. They claim that they made 32 PIPS on AUD/USD without indicating whether that happened in 5 hours, 5 weeks, or 5 months. Perhaps they lost 5,000 PIPS over 6 months and made 5,032 PIPS in the last two weeks – a total of 32 PIPS, in other words. Don’t even bother looking at such results.
- No information about current open positions
The second clue that a signal service is a scam is that no data is provided about current open positions, as you can see in the example below:
When you load their Myfxbook results, everything is private – balance, equity, history, open trades, profit, deposits. There’s nothing to see, and it’s a shame that people believe such things just because they are on Myfxbook.
Yes, you should trust Myfxbook if you see that there are no open trades holding huge loses. Maybe they show a gain of 163%, but there may be open trades that – if you closed them all – you would end up losing half of your account.
Please continue reading or watch Common Forex Signals Scams Video #4
- No trial period or money-back guarantee
The next clue that a signal service is a scam is that they offer no free trial period or money-back guarantee. I would say that there should be at least a free trial period or a super-low charge of $1-5 to test the signals. If there is no free trial period, there should be a 30-day money-back guarantee. If none of those things are offered, stay away.
- Trading signals that do not match trading history
Even when a service shows verified results, always keep in mind that Myfxbook may be displaying results from a different strategy.
Let’s say that you have found a service with good Myfxbook results and signed up. For the next days or weeks, you receive signals. Everything seems to be fine, but you’re not making any money or maybe some. However, the trading signals you’ve received do not match the Myfxbook account on the service’s site. This is suspicious because it may indicate that the provider is sending random signals – in other words, the profit you made may have been pure luck. The service may be sending random signals until they pass that 30-day money back guarantee, but they’re stealing your money. Basically, they trick you with good Myfxbook results from a different website – it’s very easy to do.
- Unusual payments methods
There are many reputable online payment methods, like PayPal or ClickBank. If you come across a signal service that asks you to pay by wire transfer to a bank account on an island you’ve never heard of, or that requires payment option that doesn’t work in your country or is really new, don’t trust it. Pay attention to the payment options they offer.
How to know whether a signal service is worth following
These six clues will help you determine whether a signal service is worth following:
- The signal service has a trading record on Myfxbook, ForexPeaceArmy.com, FXBlue, or another reputable verification system. If there are no results verified by a third party, don’t waste another second; move on.
- Good trading signals with good strategies will have a trading record of at least 6 months and 100 trades. Without a minimum of 100 trades, there is not enough statistical data to make a determination about the strategy. If they generated 10 trades and they’re in profit, it may be luck or a long-term strategy where you could be paying to get one signal once a month or something like that. In my view, it’s not worth the money.
- Look into whether the strategy has a drawdown that you’re comfortable with; for example, can you live with a 30% drawdown? If you started with a $10,000 account that would mean $3,000 in floating loss. Some people would say that a 30% drawdown is okay, but for others even 10% is too much – they can’t handle the pressure.
- Make sure the subscription or performance fees are affordable so you can end up in profit at the end of the month – this is very important. For example, if you start with a $200 account and the signals make you 20% but the service charges $50 a month in fees, your profit wouldn’t even cover your monthly subscription. It doesn’t make sense to join signal services for small accounts unless your plan is to test them for a few months. Even if you have invested a significant amount, like $10,000-100,000, you should calculate the net profit potential. Will it be enough after you pay the subscription and performance fees?
- I’ve already spoken about this, but it’s an important clue: Do they offer a free trial period or a money-back guarantee? I would be suspicious if neither was offered.
- The service should clearly show current open positions because they may be holding positions in loss for a long time, a floating loss, for example.
How bad signals can make thousands of PIPS in minutes
Now, I will demonstrate how bad signals can make thousands of PIPS in minutes and verify this through Myfxbook. I know that such claims sound impossible but have a look at the screenshot of my MetaTrader4 account:
I have one trade open which happens to be a long position (1.0 lot) and, luckily, the market moved up. I opened this position an hour ago, but that proves nothing since everyone knows that a position can go into profit in minutes. If it goes against you, you can open 2, 3, 4, 5 accounts – these are demo accounts anyway. You would open positions in every possible direction (e.g., buy EU/USD, sell EU/USD, buy GBP/USD, sell GBP/USD) and wait a few minutes to see which one takes off, generating a profit of 10, 20, 50, or 100 PIPS. I will show this in my Myfxbook account:
As you can see in the above screenshot, the track record is not verified but that’s not necessary here – this is just an example. In any case, it’s the same account as before; since it doesn’t have a “Close” position it displays the message, “You haven’t made any trades, so there are no statistics to show.”
As you can see in the above screenshot, I have double-clicked my trade and opened this window. I closed a micro lot, 0.01 position. Then I clicked the yellow “Close” button, which says that it will close the micro lot of my USD/CHF position. The interface shows that there are 0.99 positions left, and that I have one closed trade that profited me CHF1.14.
Now, I will update my results in Myfxbook. Here’s a little trick: Go to “Tools,” then to “Global Variables,” and scroll down to the “Time” variable, which you can see in the screenshot below. Click “Delete” and then “Close” – this uploads a statement in seconds.
Then I click “Reload” in Myfxbook to see the results. It shows one closed trade and 11 PIPS. It’s only one position, but the statement shows that I made a total of 11 PIPS in October.
I just need to repeat the same action another 99 times, closing this position 99 times until it’s gone. 1.0 lot = 100 trades x 0.01 lots. To do it faster, I run a special script called “Trade Explode,” which will explode the trade by micro lots – each of these positions close with a profit of roughly 11 PIPS each.
Now I have 100 closed positions, each one with a profit of roughly 11 PIPS. When I update Myfxbook, it shows that the strategy made 1,321 PIPS. That’s a lot! In terms of money, I made CHF132.
It’s only one trade - imagine if you did this every day. If it hits “stop loss” you can open another trade until you have one where you can repeat this action and close it 100 times.
“Advanced Statistics,” which you can see in the above screenshot, shows 100 trades, 100% profitability, and 1,321 PIPS. “Average Trade Length” shows 2 hours, so no one will see this as a scalping strategy and, if they scroll down, they will see no open trades, no open orders, no floating losses in history – every position is marked.
Obviously, there is something wrong because all “Open” prices are the same (see the above screenshot). But if there were thousands of these positions after a few weeks, most people wouldn’t notice. This is how signal providers can trick you into thinking that they’re doing a good job, when they are not.
Always make sure you see the balance, the equity, the drawdown, the profit, and so on. Remember that you can choose between PIPS and Lots. You can also see how many lots were used in one day. If you see that the same number of Lots is used every day, it’s nothing suspicious, but maybe every other day there are Lots with big numbers like 10 or 20. This suggests that it’s a Martingale trading strategy, and that’s really bad.
In short, make sure you know how to read Myfxbook results because it can be very misleading if you don’t know where to look.
I hope that you’ve found this article helpful and that you’ll join me for the next one where I look at Fabricated Backtest Results Forex ScamEditor'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.