Robot Trading Software Scams: Can They be Avoided?

Forex Fraud Analyst Team

robot trading software scams

There has been a growth in recent years of automated trading systems, often referred to as ‘robot’ trading. This has led to undeniable benefits for many traders who use them successfully to make a trading profit that might be a lot more difficult to achieve without them. In this article, we’ll be looking at how robot trading software works, why you should be wary of forex robots scams, and how to spot and avoid them.

What is robot trading software?

Robot trading is an automated trading system based on algorithms, which allow investors to set out their own ‘rules’ for entering and exiting a position. The software can be programmed in advance and left to its own devices to execute trades. Automated trading can be an excellent idea for those with time restraints or a lack of experience and knowledge of the markets. It is not entirely ‘hands-off. It is still necessary for traders to track their accounts and monitor their market positions, but it does allow for a more relaxed approach to forex trading.

Using simple signifiers such as a moving average crossover, robot systems can also help take the ’emotion’ out of trading, as moves are made only when predetermined criteria are met. That can be a good thing for new and less experienced traders as it prevents them from being carried away in the heat of the moment and holding a position too long.

The relatively recent growth of these robot trading systems is due to several factors, the main one being the ease of online connectivity to direct access brokers. There is also a general trend towards using automated and AI processes, and forex trading is no exception. Trading using robots can be highly convenient. They control your trades while you continue with your everyday life, secure that your automated system will buy and sell for you at the best times. It is unsurprising that robots have become popular in the forex trading industry and are now available from most brokers.

However, as with any other ‘system’, automated trading does not offer traders a perfect investment strategy or a guarantee of success. Even the best automated systems are not foolproof, and there are, unfortunately, plenty of opportunities for scammers to take advantage of the concept to commit acts of fraud. So, is robot trading safe? And are there things you can do to protect yourself and make it safer?


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How Do Robot Trading Scams Work?

The first step to protecting yourself is understanding how forex robot scams work. There are a few ways scammers can profit from selling these trading systems. Some are simply bad or untested systems, running on poorly made software, and will not lead to trading success. Some scammers will also try to clone existing software and pass it off as a newer, better, automated trading system.

Often the marketing behind the systems is good enough that traders will buy them and, unsurprisingly, will not get their money back if the system does not work for them. Trading robots are often marketed as a ‘trade secret’ or get-rich-quick solution to trading, based on the fact that they have all the knowledge and skills to earn you profits, but this is not always the case.

Even legitimate bots are sometimes oversold by scammers just trying to earn referral fees. While it is true that these bots have excellent artificial intelligence and can monitor the markets more carefully than a human trader, they also have their shortcomings. Trading is not all about algorithms and technology. Part of being a successful trader is developing natural human intelligence to monitor markets and form strategies to suit a wide range of circumstances.

Fundamental analysis can impact the forex markets, and humans can carry this out, whereas robots use technical analysis. Humans can spot unusual patterns as the markets change and fluctuate and sometimes go through periods of sudden volatility. Various human skills are nearly impossible to replicate in a robot, making robot trading risky.

How to Spot Robot Trading Scams

There are various things to look out for that will enable you to spot and hopefully avoid a robot trading scam. Many of these automated systems are available through reputable, registered and regulated brokers, but some can be bought privately. Be very wary of private third-party vendors, especially if they approach you with unsolicited advice and start to employ a ‘hard sell’ to get you to buy their system. It is generally much safer to use the robot trading systems provided by your broker, assuming you are using a reliable broker who is fully licensed and regulated. In any case, it is vital to research any software you are offered thoroughly before committing to spending any money with the provider.

Untested and unverified systems have the potential to make trades incorrectly and lose money for traders. Unscrupulous companies could even programme their software with a deliberate bias that affects outcomes negatively for traders. Other software may not be working against you but might be just trading randomly, so it is unlikely to give you the profits you are hoping for.

As with any potential forex scam, always be wary of anyone promising you ‘guaranteed’ or unrealistically high profits. The adage ‘if it sounds too good to be true, it probably is’ should always be kept in mind when assessing robot software for potential use. Any system that offers consistently high profits, especially for a low price, should always be approached with caution. Remember that some scammers deliberately sell systems reasonably cheaply. They are working on the assumption that they can make high sales volumes at a lower price, and people are less likely to bother to chase them up or complain if they have only spent a small amount of money.

New scams are often based on old tried and tested models that are simply reapplied to a new system or technology. The idea that automatic trades can be generated that earn money while the trader is asleep is a con as old as the markets themselves. So, examining what is on offer and conducting in-depth research is key to avoiding fraudulent robot schemes.

how to spot and avoid robot trading scams

Do your research and take a look at reviews and ratings, both from other customers and from industry sites. If a system has been submitted for formal review and tested by an independent source, that is undoubtedly a good sign. However, even these kinds of reviews can be faked or cloned from other reputable systems, so look to the source of information rather than just take something posted on a company website at face value.

Testing a trading system’s parameters is essential, as an incorrect setup will generate random buy and sell signals that will cost unsuspecting traders money. On the question of cost itself, automated trading systems have been around for a while. Although they used to be very expensive, they now tend to be much cheaper, so a system charging a very high price is actually a red flag.

Co-mingling of funds is another trick that fraudsters can use. This means that individual investors cannot keep track of the actual performance of their investments, which can allow unscrupulous companies to take advantage by way of high outgoings that end up coming out of their clients’ pockets. Of course, co-mingling isn’t always a sign of fraud. To reduce the risk in this area, always ensure you are using a reputable broker.

Other warning signs that a particular robot trading scheme might not be legitimate are similar to many other potential frauds. If a broker doesn’t allow withdrawal of funds, if communication is slow or non-existent, and if trading problems occur regularly are all danger signals that need to be considered.

The usual rules for ‘due diligence’ and careful investing can help traders separate the good systems from the bad or fraudulent ones. Ask questions before investing and research the company carefully. Choosing a system or platform that offers a no-commitment trial period is always a good idea, so you can try out the system before you buy.

The Safest Forex Brokers

The best way to avoid scams is to ensure you always trade with a regulated broker. This is why we have listed below the safest forex brokers for you to trade with.

Broker Features Min Deposit EURUSD Spread  
Number One Broker BlackBull Markets LogoYour capital is at risk US Clients: No Regulated : Yes – Flexible leverage up to 500:1 – Multi award-winning New Zealand broker – Institutional-grade spreads from 0.1 pips $200From 0.1
75 % of retail CFD accounts lose money US Clients: No Regulated : Yes

– Ultra – fast execution from 0.1s
– Low spreads from 0.0 pups
– All trading strategies allowed
– No restrictions on profitability
– Top trading conditions

$100from 0.0 pips
Sign Up 75 % of retail ...
AvaTrade LogoYour capital is at risk US Clients: No Regulated : Yes

40% New Member Bonus
– MIFID, ASIC, FSA & FSCA regulated
– Free Online Trading Coach

 

$100Fixed
Sign Up Europe* CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Plus500 Forex broker logo72 % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. US Clients: No Regulated : Yes

– FCA, ASIC, CySEC Regulated.
– Multi Asset Trading Platform.
– No Time Frame For Demo Accounts.

100GBP/AUD/EUR/USDFrom 0.0 pips
Sign Up 72 % of retail ...
Moneta Markets LogoYour capital is at risk US Clients: No Regulated : Yes $50from 0
vantageYour capital is at risk US Clients: No Regulated : Yes
  • ASIC Regulated
  • Well Established
  • No Fees
  • 24 hour support
$200From 0.1 pips
LegacyFX LogoYour capital is at risk US Clients: No Regulated : Yes
  • CySEC regulated.
  • Good for beginners with excellent trading academy.
  • Beginner Friendly
$500From 0.6 pips
Between 74-89 % of retail investor accounts lose money when trading CFDs US Clients: No Regulated : Yes
  • FCA, CySEC, DFSA, BaFIN, SCB, CMA & ASIC Authorized and Regulated
  • 24 Hour Support
  • Negative Balance Protection
$200NDD 0.09 / Standard 0.69
Sign Up Between 74-89 % of retail investor accounts lose money when trading CFDs
Your capital is at risk US Clients: No Regulated : Yes
  • Crypto deposits possible
  • Bonus offers
  • Leverage up to 1:500
  • MT4 and Allpips platforms
$25From 0.4 pips
Forex Broker eToro Logo67% of CFD traders lose US Clients: Yes (eToro USA) Regulated : Yes
  • Social Trading Platform
  • FCA & CySEC Regulated
  • Minimum Deposit $200
  • Demo Account
  • Copy Trading
  • 2000+ Instruments
$200from 1
Sign Up 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Skilling forex broker logoYour capital is at risk US Clients: Regulated : Yes $100
Sign Up 69% of retail investor accounts lose money when trading CFDs with this provider.
Swissquote logoYour capital is at risk US Clients: No Regulated : Yes
Pros: Cons:
Market-leading regulatory framework Minimum balance requirements
Trader focused site design Not available in some countries
Track record of over 20 years
Reliable and cost-effective trading platform
Extensive range of markets on offer

 

 

1000 EURBank: 1.1 EU traders: 1
VT markets logoYour capital is at risk US Clients: No Regulated : Yes
  • Access the market depth window to view the top bids and offers.
  • Place trading alerts.
  • Execute trades with the assistance of robots (Expert Advisors).
No minimum deposit From 0.0 pips
Trade360 LogoYour capital is at risk US Clients: No Regulated : Yes
  • All trading strategies allowed
  • No restrictions on profitability
  • Top trading conditions
$450From 0.0 pips
Oanda Logo77% of retail CFD accounts lose money US Clients: Yes Regulated : Yes
  • No Minimum Deposit
  • Over 100 instruments
  • Web, desktop, mobile platform and MT4
  • Best Retail FX Platform 2018
  • FCA & ASIC Authorized and Regulated
  • Founded in 1996 with HQ in Toronto, CA
Nonefrom 1.2
LiteForex LogoYour capital is at risk US Clients: No Regulated : Yes

– Regulated broker
– Only $50 min. deposit
– Wide range of Trading Instruments
– MT4, MT5 and Web Trader Platforms
– 24/5 technical support
– Use ECN technologies

$50 From 1 pips
HYCM LogoYour capital is at risk US Clients: No Regulated : Yes

– Regulatory compliance is under the auspices of the FCA in the UK, the SFC in Hong Kong, the DFSA in Dubai, and by way of the MiFID for the European Union.
Up to $5,000 Welcome Bonus (T&C apply) Applicable only for HYCM Limited

$201.8 pips
Exness logoYour capital is at risk US Clients: No Regulated : Yes
  • Instant automated withdrawals 24/7
  • Commission-free Standard accounts
  • Some of the lowest spreads on the markets and stable execution
  • Unlimited leverage
  • Free VPS Hosting
Starting from $10 on Standard and $200 on Professional accountsAs low as 0 on Raw Spread and Zero accounts
Forex Broker City Index Logo75% of clients lose money. Capital at risk US Clients: No Regulated : Yes

– FCA, NFA, CFTC, IIRO, FSA, CIMA, MAS, SFC Regulated.
– Award winning platform.
– Beginner Friendly.
– Well established, safe and trusted.

£100Varied
iq option71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money US Clients: No Regulated : Yes

– 50 Euros minimum deposit
– State of the art platform
– 24/7 support in more than 17 languages
– Free demo account

20 EurosVaries
Sign Up 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money
CCI Traders logoYour capital is at risk US Clients: No Regulated : Yes
SquaredFinance LogoYour capital is at risk US Clients: No Regulated : Yes $100From 0.0 pips
IC Markets LogoYour capital is at risk US Clients: No Regulated : Yes
  • All trading strategies allowed
  • No restrictions on profitability
  • Top trading conditions
$200From 0.0 Pips
BDSwiss trader logoYour capital is at risk US Clients: No Regulated : Yes
  • Low-cost trading
  • Excellent research and analysis
  • Great trading experience
10€ / $ / £ (depends on account type and region)1.2 pips
Sign Up Trading in Forex/ CFDs and Other Derivatives is highly speculative and carries a high level of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent advice if necessary. Speculate only with funds that you can afford to lose.

    Conclusion

    Robot trading systems can be highly beneficial for traders with some experience who can commit some initial time to their own research and fact-checking. They are not, however, a magic method that a novice trader can automate before sitting back and collecting profits, although that is sometimes how they are sold to new traders. As more legislation comes in to keep up with the latest tech and to deter scammers, it is creating a safer trading environment. However, new scams are emerging all the time, so it is always good to be wary and stay on the lookout for fraudulent activity.