As a trader almost everyone of us who are in the phase of “the search of holy grail” could have tried exploring the so called PAID indicators and often ends with wrong indicators which has no edge in the market. Probably 98% of the PAID indicator providers are snakeoil vendors who polish a open source code by changing the color of the indicators and some little tweaks in the codings and parameters and present it as a colorful, exotic future forecasting stuff by guaranteeing enormous amount of returns (Most of the times it beats Warren Buffetts CAGR record).
If you are still in the stage here are some of the ways where you can protect yourself from ending in wrong hands
1)Ask the PAID indicator provider to provide backtest report for the past 5 years for your favorite instrument which you are willing to trade. Most of the snakeoil vendors dont even have enough data.
2)Take a Demo of the PAID indicator and backtest yourself (or ask him to backtest in-front of you) across your favorite timeframes you are willing to trade. Make sure you are adding all the trading cost(Brokerage, Slippage, Turnover Charges…etc). Most of the cases the snake oil vendors doesn’t have enough skill to do even a simple backtest.
3)Observing a trading system live for 3 days or a month will not going to help you to fully understand the nature of the trading system. And if you are going to judge the system based on the short span results of-course you are making a big mistake.
4)If the PAID indicator provider is going to backtest only for the past month with 15 or 20 trades and claiming more than 75% winning ratio and probably you insist him to provide results for last 500 trades or last 1000 traders. Only observing a huge number of trades can give you an overall idea of the trading strategy performance across different style of markets(Bullish,Bearish, Sideways) and its riskiness involved in trading it.
5)If the PAID indicator provider is showing your only the snapshots of the indicator which shows that it predicted the future perfectly then you have the repeat the steps 1-4 again. Most of the cases if he is guaranteeing you a sure shot returns after trading his system then most probably he is a snake oil vendor.
6)The one who is not speaking about losses or risk involved in a trading system is a snake oil vendor. Neither you are not interested in understanding the risky nature of the trading system nor the PAID indicator provider doesn’t want to reveal you the risk involved or dont have sufficient knowledge to explain you the riskiness in the trading system.
7)Its quite easy to figure out a snake oil vendor who generally show various charts that made huge profits with their contact numbers embedded over the charts.
8)Now there are enough snake oil vendors entering into the Algo trading segments as newbie traders feels the algo trading can be the real money making machine as it can forecast better than him. He feels he can sit back and relax , do shopping ,concentrate on his day job or attend family functions during trading hours. Which is ideally not going to be that easy unless you have enough experience with Statistics, Programming, Understanding the nature of Market dynamics and of course Trading Experience.
If you have any other snake oil vendor prediction mechanism you can write it down here 🙂