Before I delve into this week’s missive I’d just like to thank everyone who got in touch after my request for help with testing systems. I was overwhelmed with the response and most people are now starting to test one or another. Your help is really appreciated and I hope the systems turn out to be as good as they initially seem. Unfortunately I’ve a full quota of testers now, but I’ll be in touch in the future if I require more help. Testing systems really is important – there are so many scams out there that masquerade as bonafide collective investment schemes.

How to spot the scams that present themselves as collective investment schemes

While we’re on the subject of systems and auto trading programs, it would be useful to clarify the difference between an auto trading program and a managed account.

Auto Trading (also known as Expert Advisers)

This involves having software that will automatically trade for you on your computer. This is entirely legal because you have control over whether you use the software on a particular day or not. Although you can’t control the exact trades, you can often tweak the settings.

Managed accounts

This is where you give a qualified advisor permission to trade with your funds. This is either by following an automated system or with discretionary trading. Provided the firm is FSA authorised to do this, it is entirely legal and in theory safe provided the trades are good.

Illegal collective investment schemes

Anyone managing a group of people’s money without proper qualifications or permission from the FSA may be deemed to be running a illegal collective investment schemes.

There is an entire department in the FSA dedicated to shutting these down. The reason they are so dangerous is that the individuals operating the scheme do not have the sufficient qualifications to be handling other people’s money in the way that they say they will do.

If it goes wrong, you may have not come back and no chance of claiming compensation. If the scheme was operating illegally then you have two major risks a) the person could run off with your money or fudge your returns b) the person may lose all the cash by making terrible trades.

If you are approached or come across a firm/individual offering to manage your money, always double check that they are FSA authorised to do so. If they are not, it is highly likely they are operating an illegal collective investment scheme. Note that they may say something like “options/forex is not covered by the FSA”. This is not true, the collective investment scheme ruling covers any pooled investment from shares to cars.

Here’s a definition of a collective investment scheme:

The FSA spend lots of time clearing up the mess created by illegal collective investment schemes, so don’t be tempted no matter how good the returns look.

FAP Turbo

Last week I mentioned the latest offering from the Forex Mafia (TM). FAP Turbo seems to be something that has caught your attention. After all, why wouldn’t it? A trading program that automatically generates untold profits certainly piques my interest.

We’re all busy people, especially with Christmas coming up so making trading profits without having to trade yourself seems a dream come true. The trouble is that most of the time, it is just a dream.

I had a couple of emails from people who thought I was too hard on FAP turbo last week. I must admit I am rather prejudiced against it. The existence of live results (supposedly) is a major plus point in comparison to previous offerings. What galls me is the claims that this system will smash all the ‘backtest and optimisation hype’ of other automated trading programs.

It’s an incredible claim to make, especially as the previous products they promoted were 100% guilty of doing just that.

The last one, Forex Auto Cash Robot was a case in point. Supposedly no losing trades in 7 years, but not one single live trade. What happens when it goes live? Yup a major losing trade in the first week.

But this wasn’t a losing trade, no… It wasn’t a losing trade until it was closed. Basically Forex Auto Cash Robot would hold on to a trade for weeks, maybe months until it turned around. An extreme example is like buying the FTSE right at the peak in 2000 and holding on, even until today, in the hope that one day it will come around and you won’t be able to book it as a loss.

The latest Forex Mafia offering does seem better with live results displayed, but for me, it’s like Del Boy offering you a cheap video camera after selling you all manner of tat.

“Kushdi, pukka, oi Dave, check out this video camera. Russian ex military, just 100 notes.”

“Erm sounds cheap. But what about that DVD player you sold me that exploded. And that designer perfume that smelt of wild animals. And that radio controlled car that melted in the sun. And that mineral water that glowed in the dark…”

“This one is pukka, honestly. Alright, I’ll tell you what I’ll do, I’ll knock it down to 75 notes and throw in a Chanel handbag for the missus.”

“Ok, I don’t want to miss out on a bargain.”

“Perfick, kushdi.”

The last few trading programs promoted by “Markus Leary” were dreadful and for me, the current FAP turbo is tainted by these other products. If buying FAP Turbo please be aware of the previous systems that have been churned out by this team.

For posterities sake I have purchased FAP turbo, but only so I am able to pass on some first hand experience. I may be completely wrong and I hope that I’m not so that we’ve got something that makes us all some good money here. However, I won’t be entirely surprised if it explodes or starts talking Japanese.

I wouldn’t be in any rush to purchase it. If it is any good, it will still be here in a few months time with more live results under its belt. Supposedly live results do appear good, but I cannot fail to notice that within a week of it starting there was a 33% drawdown.

The back test they use is on just one pair EUR/ CHF, while most of the live results appear to be on EUR/ USD. They claim that the system has a low drawdown of 35%, so it is worrying that within 7 days of the system going live, we a saw a drawdown not far off the worst ever. What will happen with more testing?

I’ll update soon.

The only Expert Advisor I’m currently prepared to fully recommend is

My trades

Some good moves on the US indices though I definitely left some money on the table yesterday. I’m still being highly selective with my S&P 500 futures trades so there’s a lot of sitting on hands going on, but so it looks to be working.

Forex markets continue to be volatile with some great moves for the quick and nimble intraday. My longer term forex trades are still ticking along ok. I use the Wizard for most of these and have been impressed over the last few months. Moves sometimes take a few days to develop, but they’ve been right more often than not in the end. A good contact put me on to an interesting service called It’s expensive, but it looks the business. I’ll report back on it in the new year.

This week’s hot trading buttons

US pending home sales are released this afternoon with trade balance and unemployment claims out on Thursday. With Christmas around the corner, US retail sales will be followed closely on Friday, as will the University of Michigan consumer sentiment numbers.

Trading wisdom

“The only thing a trader can do is control his or her risk – on each and every trade. If there is a secret to trading, it is this: take the next trade not to make money but to improve one’s skills as a trader. This is how a trader is able to make a living at the game. This is how a trader is able to avoid a catastrophic loss.” – John F. Carter