I am so disgusted and enraged with the fraudsters and scammers out there that I just had to write this post. \u00a0There has been major fraud at PFGBest, MF Global and Barclay’s recently and many others (especially Ponzi schemes) over the years. \u00a0They are the easy ones to see – I’m not addressing them right now. \u00a0There are many more that aren’t so easy to spot, especially in the trading system world (unfortunately!). \u00a0I want to share an example so you can be better prepared when doing your due diligence about trading systems.<\/p>\n
I just attended a webinar for an emini scalping strategy. \u00a0I attend webinars every once in a while if it looks like something I haven’t seen before. \u00a0Well – I’ve seen this before unfortunately. \u00a0I hadn’t seen this particular vendor but I have seen this type of deception before.<\/p>\n
This vendor showed charts in TradeStation with entries and exits displayed and the indicators showing what triggered the entries and exits. \u00a0They then show these great trading performance results (no losing months) which even include $5 for commission – sounds good so far right?<\/p>\n
Then he says something strange – “this is not an automated system, you have to manually enter the trades”. \u00a0Huh? \u00a0He just showed a trading strategy in TradeStation (which is how he generates all the performance results he shows) and says you can’t run it automated, you have to enter trades manually. \u00a0Well, I know with 100% certainty that this system he is displaying can be run fully automated in TradeStation, so I ask him “why not run it fully automated?” \u00a0No answer. \u00a0He keeps saying “any more questions” and ignores my question. \u00a0Red flag goes up.<\/p>\n
I ask myself “why would he say it can’t be traded automated?” and it hits me – he is not including slippage. \u00a0You know, the spread, the difference between the bid and ask? \u00a0Except for limit orders, buy orders are filled at the ask and sell orders are filled at the bid. \u00a0This is one of the costs of \u00a0trading that must be accounted for. \u00a0I asked the host\/presenter if he included slippage in the results…..no answer. \u00a0He shows a section of the report where the slippage used is displayed – it shows 0 (no slippage included). \u00a0So now I ask why he didn’t include slippage in the results….again no answer. \u00a0I make some comments about the deceitfulness of not including slippage in the results….no answer.<\/p>\n
When he showed the performance results for the past few months I quickly noted the net profit and number of trades of the most profitable month. \u00a0I then divided that month’s profit by the number of trades and came up with $20 per trade. \u00a0This is for the ES (emini S&P) where the spread is always a minimum of one tick ($12.50). \u00a0So the slippage cost per trade is $12.50 at entry and $12.50 at exit. \u00a0That is $25 per trade. \u00a0So the real average trade is $20 – $25 = -$5. \u00a0Yes, negative, a $5 loss per trade! \u00a0And this is for his best month! \u00a0This strategy he is showing and selling to people is really a loser, yet the results he is displaying shows all winning months!<\/p>\n
Now it is clear to me this is a scam – the presenter knows he is being deceitful or he would address my questions. \u00a0Also, he only sells his system – he doesn’t lease it. \u00a0Know why? \u00a0Because he knows it doesn’t work so he wants to get all of your money up front. \u00a0Disgusting.<\/p>\n
I’ve seen this enough times I guess it shouldn’t get to me but it still does. \u00a0The reason why is that there are real people that are going to give this guy their real money and then trade it with real money and lose even more! \u00a0And this guy doesn’t care – he just wants your money.<\/p>\n
Please do your due diligence when considering investments. \u00a0Do not fall for the quick sale. \u00a0If they say “to get this discount price you have until midnight tonight”, run away immediately. \u00a0When looking specifically at trading systems, here are two key questions to ask:<\/p>\n
1) Are limit orders used? \u00a0If so, the results they show are probably not possible in reality.<\/p>\n
2) Are commission and slippage included in the results? \u00a0If they don’t include both then\u00a0the results they show are not possible in reality.<\/p>\n
Asking at least those two questions should weed out most of the scammers. \u00a0I hope none of you have been fooled by some of the tricks system vendors use, but odds are you probably have.<\/p>\n
My condolences go out to the victims of the MF Global, PFGBest and all the other fraudsters and scammers out there. \u00a0I sure hope your money is recouped as it rightfully should be.<\/p>\n","protected":false},"excerpt":{"rendered":"
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