A Trading Expert With Conflict Of Interest – Huge Red Flag

By | August 2, 2016

A few reminders of how conflict of interest looks like – always good to keep in mind before entering into a business relationship with a trading/financial professional.

1. EuroScalperPro, an 100% automated Forex EA, is currently being heavily advertised on Facebook. It comes in a free version, if you sign up with one of the three supported brokers, or a paid one, at $197/month or $1,997/year. No matter which one you choose, there’s the same big conflict of interest: the guys behind EuroScalperPro (more on them in a second) make money – either through commissions on volumes traded or cash upfront – irrespective if the client makes profits or not. If this aspect was clearly understood, I believe only a few people would still want to do such a deal. Particularly that in this case you don’t actually know who you’re dealing with – the About page is hilarious:

Our ability to generate superior risk adjusted returns through widely ranging and evolving market conditions has captured the attention and respect from traders, fund managers, investment houses and private wealth managers worldwide. Our Commentary and Research have been quoted across the Internet and we are widely regarded as the authoritative source on quantitative Forex trading.

It takes some chutzpah to write something like this when no names, no faces and no supporting evidence are presented.

2. If someone got the impression from the example above that this happens only with anonymous companies, let me present Boris Schlossberg and his BK Asset Management.

2. What fees are associated with the Managed Accounts Program?

There is no management fee. BK Forex Advisors is compensated via rebate from broker.

Or, if you prefer to pay upfront, you can do that on the other website, for $145/month.

If you’ve been around Forex for some time, the chances are slim that you haven’t heard of Schlossberg or his business partner Kathy Lien. In their own words:

We are known in the forex community as Traders First Analysts Second because unlike market commentators who simply offer up their opinions, we risk our own capital in the market every single day.

But a word of warning: don’t make the mistake of asking them to substantiate the ‘Traders First’ part. You might get blocked (Boris) or ignored (Kathy).

fxflow3. FINRA Files Complaint Charging Broker With Fraudulently and Excessively Trading Accounts of Elderly, Blind Widow

The complaint alleges that Werner engaged in a deceptive and fraudulent scheme by churning the widow’s accounts over a three-year period to maximize his compensation by charging more than $243,000 in commissions, while causing the customer approximately $184,000 in net losses.

Beside highlighting again the danger that exists when the interests of both parties are not aligned, this case also shows that even in a heavily regulated arena, there are still some scumbags left.

6 thoughts on “A Trading Expert With Conflict Of Interest – Huge Red Flag

  1. BD

    Forex has dangerously low margin requirements. This makes trading on Forex an extremely “easy” way to loose money on par with buying lottery tickets. In reality I would say that a trader should have at least $0.5mil account before she/he can employ any kind of statistical edge. I trade for 20+ years including options and futures. I have never placed a single real Forex trade in my life. I have tried Forex on paper a couple of times . I have no doubts that there people and systems which can make money on Forex with reasonable consistency (and a significant drawdown from time to time). I doubt that we are talking about accounts less than 500K. Beware of people who say that you can start with $1,500. It is very easy to start trading forex with 1,500USD and it next to impossible to finish a trading day still in money.

    Reply
    1. JustGJM

      No you wrong but almost right. I know someone who trades a 10K account and makes real money. Real withdrawals. Uses a 1 rule he said from BWILC. Some can do it. Not me yet though :( most do fail, and few 100 usd is not enough.

      Reply
      1. BD

        An often answer of a trader/investor is “show me a trading record for longer than X trades”

        Reply
  2. jim

    BD, just curious, on 2 points you raised. First can a forex trader not trade on levreage, and use a micro or mini account and trade $ 1 = 1 point , then you don`t need 500 k ? Secondly are you suggesting there may no long term edge in forex unlike indexes for example that have a natural upward bias, or commodities that may trend for years in one direction ?

    Reply
    1. BD

      Disclaimer: I am not a forex trader.

      A std lot is 100K, mini is 10K. A 2% move in the underlying is 2K. I personally could not handle emotionally wise 2K move in a portfolio smaller than 0.5m. A Forex trader does need 2% move to make/loose lot of money. This is where a leverage comes in or lot of capital.

      Ability to trade $1 = 1point probably means that you are using subpar brokerage service.

      Forex is pretty similar to indexes. Forex can trend, drop fast, etc. It just “feels” wrong to me – I tried to trade it and I failed to apply my trading methods. Forex probably has more outliers than the ES, for example. In SP serious crashes happen about once every 3 years. In Forex pairs you can find your self on the wrong side of a crash a couple of times in an year.

      I do know people who are full time Forex traders. These individuals all started with significant net worth.

      Reply
  3. Gary

    BD, so you clearly state that 4X is not for you. That’s fine, but that’s not to say it can not be a very profitable market to trade for others. Different strokes for different folks that’s all. As long as you are keeping a proper risk reward on your trades & your method has an edge over the long term it really does not matter what market you are trading.
    I do not agree that you need the starting capitol that you suggest. Leverage in Forex allows you to start with a much less funded acct.

    Reply

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