Don't get ripped off by EA.
Here is my tutorial that will help you not to be “scammed” by the EA.
I’m going to reveal everything I know about this subject, we’re also going to put ourselves in the shoes of a seller and a buyer.
To start, I will have to define what an EA is.
EA: Expert Advisors analyse quotes of financial instruments, as well as execute trade operations on the Forex and stock markets.
Now I would like to remind you of one thing about the MQL5 regulation.
8. Limitation of Liability
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What you have to understand about this rule is that you always accept it after every purchase! In this regulation article 8 specifies that he is not responsible for any potential loss and will not make any refund.
So after your purchase you are on your own, if the author has scammed you 100% and you can prove it, it will not change anything.
Let’s talk about the scam, because in order to talk about it we have to define it well.
Scam: Swindle, deception.
OK, let’s define these 2 words.
Swindle: Crime, deception consisting in obtaining a good or the supply of a service by means of the use of a false name, a false quality, the abuse of a quality or fraudulent manoeuvres.
Deception: Offence consisting in misleading a person on the goods which one delivers to him or the provision of services which one carries out.
OK we know a little more, now I want to put forward what MQL5 says when it comes to publishing an EA.
The Product must not:
- guarantee, promise or hint at profits through the Product name, logo, screenshots or description;
- contain words and expressions in superlative degree relating to Product features or the underlying concept;
- present trading strategy backtest results as real trading results, whether expressly or implicitly;
- contain links to external resources to be used as a description;
- contain flashy/immodest titles of description sections or Product names;
- use images of money or valuables in any form;
I admit that it is difficult to present a product without showing earnings in backtesting or live trading. In any case, MQL5 is against sellers who abuse and promise to get rich or against a promise of gain.
Now I’ll come back to the word “scam” which is misused in this context.
In reality there is no scam, just an expectation of an EA that does not happen. Which is possible, because nobody can know the future, the EA is no exception!
When we provide an EA, for it to be published it must meet several criteria, it is tested and if it does not meet the criteria it is rejected and the author must change the code so that it works with all the criteria.
What are these criteria?
It is for the proper functioning of the EA on any type of trading account. It verifies the volumes, the authorisations, the number of maximum orders placed and that the SL and TP if there are any are correct.
So to recap a little bit, the author who wants to publish an EA must not promise money gains and he must provide an EA that correctly executes buy and sell orders.
The buyer can download a demo that will only work in Backtest, i.e. tests with past data, it is not possible to do live. This is the only possibility for the buyer to decide whether or not to buy the EA.
Of course, Sellers knows that postulating a live signal allows them to better value the EA.
Let’s put ourselves in the shoes of a seller who wants to sell an EA that he has made. Only to sell it must attract buyers, to do this it will show gains with without talking about it. The buyer is going to project himself with his future EA and therefore expect the EA to do the same thing in the future as with the Backtest, only I remind you, impossible to know the future. In our case the author will allow the buyer to project himself.
We are going to create together an EA that will be sold on mql5, in fact, we are going to “prepare” it, because coding is not our subject. We are going to take an EA that we all have which is provided as an example as soon as we install Metatrader5, it is “MACD sample”.
Don’t forget that we are in the shoes of the seller and we are on January 1st 2020, we have designed an EA which is “MACD Strategy”, only we have tried for the very first time our EA and great it works there are no errors, but … It is not good …
We want at least that it is good from 2011 to 2020 (we keep the years 2020 to 2023 to pretend that it is the future and therefore the live test. It must be understood in this demonstration that we use the most basic EA, there is no filter or other indicator and no one can say that this EA is a “Scam” Other vendors have more complex EA that allows much more optimisation.
To improve our EA we will use the Metatrader 5 improvement tool.
It is possible to choose on what we want to optimise the EA, the profit, the Profit Factor or the Complex Criterion max.
In general, in order to meet the needs of the buyers, the Sellers will propose the maximum gain with the backtests. We will do as they do, because we want to sell, but for our backtest to be better we will change the periods of the MACD indicator which will allow us to have new and better buying and selling entries for the period 2011 to 2020.
We check the boxes and we define a beginning of the steps and an end to our periods as well as to the Stop and take profit.
We press start. The calculations will start to optimise the currency EURUSD H1 from 2011 to 2020. Metatrader5 will find the best parameters.
After a long time of waiting (2 hours for me), we finally have the result of our optimisation.
We now know which parameter allows us to make the most profit.
We have a well-parameterised EA for the years 2011 to 2020 which gives us good results.
Now we will see the years 2020 to 2023.
We can see that this is not the best for the future, the 3 years following the optimisation are not favourable.
We are going to observe the behaviour of 2005 to 2011 with this optimisation.
We notice that the past is not so favourable. But our salesman is unaware of all this or he does not want to take it into account, because, according to him, the market is changing and he has optimised his EA for the market of the moment and he is happy with it. We know that for the future it is not favourable, but remember that it is January 1, 2020.
Our seller is happy, he creates his product on mql5 and writes his best description, the best screens with a nice backtest of 9 years! He removes the parameters optimised to the public, just to leave the parameters of the lot and magic number (for information it is enough to remove the word “input” in front of a parameter so that this one is not visible any more for the buyers). His EA passes the mql5 criterion tests. That’s it, they publish button appears… He can finally publish his EA because he has gathered everything to publish it. Our salesman is a good salesman, because we will say that he saw it pass by making these tests he is not himself convinced, but he knows that people will be convinced by these 9 years of backtest. He adds a sentence becomes mythical on mql5.
3 more copies at $99 before the price is $299
A favourite phrase of sellers who know their EA might not stay long is just to make compulsive buyers buy fast. That way our seller will have plenty of money very quickly.
Some sellers are not like that, they just think they have found something really great that no one has thought of before.
Now we take the role of a buyer for this EA, we have seen that it makes profits in 9 years and the author seems to know his field. On top of that we got a discount, because we managed to be one of the first to buy it for $99! Now it is beautiful and well at 299$ and the salesman announces next price 399$ it must really be exceptional this EA.
Since it’s so good at the backtest I’m going to put it directly on a real account to quickly make money with trading, because my life does not suit me I hope that this EA will quickly allow me to get out of my situation and I’ll take a job more quietly or even work less … Fortunately, I had these 10 000$ saved in the bank, I will be able to put them on my trading account and make profits!
Yes, this is how many buyers think and how they act. Never rush into anything and always invest the money you can lose! (This is one of the golden rules of trading.)
It’s been 1 month since the EA has been running on my real account and the price of the EA has gone up a lot, it’s at $499 now. Many people are interested in it, but as a buyer, I am not satisfied, because I thought in 1 month to have positive results as in the backtest, normally in 1 month I earned $ 1 000! But the author tells me that it is a difficult month, indeed I am just profitable, almost losing.
2 months after the purchase of the EA, the second month was catastrophic, I lost 1 000$ instead of gaining some and I am not the only purchaser to revolt me! the author misrepresents examine a problem occurred and which is not foreseen by the EA it recommends having all to cut until the next update.
One takes again the role of the salesman, he does not understand what it passes or if… He knows that his optimisation is not made for the future, because the parameters are good only for 2011 to 2020. What he does is a new optimisation from 2011 to February 2020. He gets new parameters much better for these last 2 months and he publishes his update explaining the bug resolution (except that there is no bug, he just optimised), so the buyers see his effort and also see that the backtest of these last 2 months is much better.
Happy everyone can put the EA back on.
Except that the continuation we know it, the EA is still not made for the continuation. Our salesman is then assigned the role of scammers. In the meantime, our seller has made great sales and amassed plenty of money.
The seller deletes his product, these blogs and posts, he puts his profile in private. He has enough money to live on for the year he’ll be back next year when no one remembers him!
That’s the story as a vendor that ends. I suppose you have been in this situation or worse, you are going through it right now and you feel helpless to do anything about it, you don’t know what to do. For those who say that it is simple to optimise with the “Criterion Complex” I can tell you that this is not the solution, because once again you will get the best results for a given period and not for the future. You can give it a try.
To finish this story, I would like to point out that there are sellers who find other solutions, they will add Grid and Martingale to recover a position (these methods are questionable and dangerous, but I will explain why and how to decrease the risk). Other sellers go further and they are aware that it is only to sell and that the buyers will lose, these sellers manipulate the backtest to make it unbelievable. I know of 2 methods that work and I have heard of a 3rd method, but I have not tested it.
- Just write the opening and closing of hard positions in the code example: on January 15, 2018, you will do only buying. The author writes these conditions, because he knows how the future evolution is. This allows the backtest to be amazing and it doesn’t seem to lose at all. This works for 1 currency at a time.
- The author optimises the settings for multiple currencies and caches thoroughly. This makes each backtest amazing even on other currencies, he can add the method 1 explain above to better direct his EA to take the right actions in the pass. To handle multiple currencies, it makes a test on the market name. Example: Market name contains “EURUSD” ? Then put these parameters and February 2018 buy, March 2018 sell, etc. At this point the EA in all backtest is amazing.
- I haven’t tried to do it, because I don’t know how to do it. It seems that with artificial intelligence it is possible to ask this intelligence to analyse the future market and adjust the parameters automatically so that the test is good. Clearly even if it is not updated the EA 5 years, it continues to make good backtest. However the live trading is only disastrous losses.
I reassure you, there is a way for buyers to avoid unpleasant surprises.
It is important to know that if the market for EA presents many EA that promise that you will be rich tomorrow, it is mainly the fault of the buyers, because as in our story, the buyers want to see themselves become rich very quickly. So in order for the sellers to sell, they give what the buyers want.
Now that we have experienced all this bad history as a buyer, I will show you how to become a careful buyer.
First of all, we don’t want a system that allows us to make a profit! We want a system that is safe for our capital. At this point you will understand why we will eliminate Grid and Martingale, because these systems are dangerous, they can lose a trading account in just a few hours. Even if it is possible to put SLs it is still risky, very risky. My advice for these systems is to withdraw money from the account every month, because it is led to lose it all one day. For me it is not conceivable to put my money in a system that can lose everything even with a SL, because at that time the Risk Reward is much too low.
What is the risk reward? From the moment we open the position, we must know how much we can lose in the worst case and at best how much we will gain. In the case of Grid and Martingale in general to try to win $10, we are ready to lose $200 when we put a SL … Which makes the Risk Reward ridiculous. I wouldn’t risk $200 to try to win $10.
So even if these Grid and Martingale systems are attractive with their regular growth, I would not choose these systems, because I do not want a constant profit, but feel safe and not afraid to lose a very large amount of money overnight, especially if every open position is an attempt to earn breadcrumbs. Unfortunately, we already eliminate a large percentage of EA’s because this EA’s is the easy to programme and ensure easy short-term gains, but not long term.
Now we are confronted with the EA that are for the most part optimised for a given period (as in our story with the seller), these sellers are not scammers, only those who add code to hide losses are, but we will not know if yes or no it is wanted. Anyway in this field it is better to stay polite and courteous, the one who lets these feelings get carried away is never right… Now we clearly can’t afford to buy EA’s to put them on a demo account and wait to see if live trading satisfies us.
Let’s see how to analyse an EA. To help the analysis I have created an Excel file that allows you to give a score to the EA, be careful it’s an additional indication, it’s not the score that will tell if the system is good.
You can find the tutorial of this Excel file and download it at this page: Tool Scored
You will find on this page how to become a good EA user: A good EA user
You now have everything you need to avoid being cheated and lose your money. Attention it is possible to lose some, but in a mastered way, which allows acting better.