Those beginners might be tempted to entrust their money to an auto-trading bot of some kind, and there’s a good chance this is a mistake.
In this post I’ll give some advice for how to spot a scam bot. This is the first post in a series on Binary trading – later topics will include things such as making your own (legitimate) bot, trading strategies and signals, the behind the scenes maths, potential brokers and more.
There’s an old saying “if it’s too good to be true, it probably is”, take that to heart as it may save you from scammers. For example, I opened a demo account with OptionRobot (who I won't be linking to becuase you should avoid them), and after 5 minutes I could see it was a load of !@#$.
Look at the above image, those are clippings from a screenshot of two simultaneously opened instances of the OptionRobot demo interface… notice how despite the expiry times and open prices matching exactly, the current ‘live’ values don’t align (and hence the payouts are inverted). As a developer I can tell you that synchronising live data between processes can be hard, which is why the above payouts don't line up - it's easier to get things 'close enough' and hope the user doesn't spot this sort of thing.
That's one way to spot a scam-bot, here are some more:
Compare real prices
Compare the prices you see in demo mode to those being displayed on other sites. FXCM offer a free demo account that you also practice trading on. If the prices for matching markets don't line up by at least a few pips, beware.
Look for overly-consistent patterns
In the OptionRobot there was a pattern that didn't break for over 10 trades in a row: the opening price of every trade on the same market was identical. Markets are usually volatile and unpredictable, look for consistencies (rather than inconsistencies) in the bots behaviour that are too stable to reflect real market behaviour.
Watch the date/time
No market is open 24/7 - almost all of them close over weekends. So how did I get the above trades on a Sunday?! If a market should be closed and the bot is trading on it, steer clear. To be extra sure wait until the weekend and see if it's still running.
High trade frequency
In a later post I'll go into expected signal frequencies (and the inverse relationship they hold with accuracy). For now it's safe to simplify: if you're seeing more than 1 trade every 10 minutes, chances are good that the 'signals' being used are fake. The best bot I've made (so far) is 63% accurate, but only trades an average of 4 times a day (it is only trading on 1 signal, but this just shows how rarely even mediocre signals come up - you can boost these numbers by using more signals and by mixing them together to raise accuracy).
In short, high trade frequency should be treated as dubious.
Expected returns: trading vs selling bots
Within 10 minutes of starting the demo bot it had made about $200 - using the minimum bet size, and no martingale strategy. If you set this bot up to trade for just 12 hours a day you would expect to see $14,400 profit per day.
If it was really that accurate wouldn't the people selling it just save themselves a bunch of time and money on marketing and sales, and just use their own bot?
This is the best illustration of “if it’s too good to be true, it probably is” - that's about half of what a top CEO would make in the same time period.
In closing: keep your eyes peeled, do some simple maths, makes comparisons, and save yourself from getting ripped off.
If you enjoyed this article, leave a comment or message me with forex and/or binary trading topics you'de like covered next.