Wednesday, June 23, 2010

How Big is the EA Business ? A Look at this - Many Times Disgusting - Business Model

The most interesting consequence Metatrader 4 has had in the world has definitely been the creation of a massive industry around automated trading products for retail traders. Most of these products are offered from a few dollars to thousands and promise to give the retail trader an advantage in the world of forex trading by making them profitable "while they sleep" simply by running these strategies which have been "made by expert traders". Of course, through the past few years we have seen that most of these products actually always fall short of their promises and never deliver what they promise. Even systems that have worked slightly for some have always fallen short of the marketing promises made on the very hyped commercial EA websites. However one of the things we haven't looked at yet is the extent of this business. How much money is there in EA selling ? How much money does the overhyped worthless expert advisor make every month ? On today's post I want to answer this question so that you can all get a glance at the HUGE money that there is in EA selling.

A very good question I have often asked myself is : Don't people learn anything ? The fact that many new systems come out every month with the same lacking evidence and obviously faulted trading tactics points to the fact that these people are making money and that people are still buying systems that have no sound trading strategies or realistic targets with the hope that they will work. However, reality here is that most people DO learn and become more difficult to "convince" as time goes by. The problem here is that there is always a big group of new traders that are introduced to forex trading continuously, these people are the ones who fall prey to these EA sellers.
But how good is this business ? The answer is HUGE. I will now make use of some evidence presented on the Donna Forex forum about the profitability of a very BAD commercial EA that had NO forward or live testing evidence and absolutely no like hood of long term profitability. This EA - called stealpips - was widely discredited in several review sites after running forward tests (an example here). However the EA was able to make a LOT of money- indeed probably more than 100K- and the website is currently being sold here. What kind of business is this ? What kind of product is "so good" that the website gets sold a few months after release ? What kind of evil mind makes up a product with no evidence of profitability to profit from new traders who probably lost much more than their purchase price trying to test this "system" on a live account ?

The answer is : almost all of these EA sellers. The saying goes that if you believe money can do everything you will do everything for money, the complete disregard for honesty, transparency and ethics in general are the most repulsive aspects of this EA business. These people don't realize that the guy buying their product is not merely a customer, that there is probably a "little guy" somewhere who lost a good portion of his saving on their piece of crap, that someone probably sacrificed a vacation somewhere to trade their product and reach the "dream" of long term profitability in trading. They simply don't give a crap and that is simply disgusting.

Now it doesn't get any better right now. The affiliate marketing game these systems play is also quite evil, based mostly on bad business tactics like spam. For example the Forex STF product - the latests production from the stealpips guys - is already publicly offered to their affiliates, suggesting mail list exchanges (what happened to that privacy policy ?) and promoting the sale of another extremely hyped product with no eviden of long term profitability. You can checkout this links on forexwarrior's post here at the donnaforex forum.

You can now imagine that if this is the kind of money a very bad system makes with a 97 USD cost per product the amount of money that bad systems with a little bit of forward testing evidence may make is MUCH bigger. Systems like the Forex robot world cup robots are rumored to have made more than 2 million dollars in sales. The truth here is that the best way to make money in automated trading is not to trade successful systems but to sell hyped expert advisors to people. You don't need to care about future profitability or sound trading strategies, you only need to care about marketing and sales and that is MUCH easier to do than to design a long term profitable system.

The truth here is that most of this EA business is made out of people who don't care about you, they simply don't mind if you wipe your accounts or if the EA stops being profitable in a few months. They don't mind if it uses a martingale progression that ensures a wipeout or a scalping technique that is overly hyped with backtesting faults. They just don't care because they are NOT trading these systems, their poor customers are and once the 60 day refund goes out... You are all by yourself (if not earlier in some cases). However, there are a few expert advisor sellers out there that do care for their customers and sell their products outside the scheme most of these marketers used, there are hard to find but certainly - as in every business - there are some people who play by the rules and offer their products with honesty and concern.

If you would like to stop buying expert advisors with unrealistic profit targets and lack of proper risk perspectives and you would like to get a true education in forex automated trading instead, please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

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