52. Scams in Algorithmic Trading: 07 Major Characteristics

Published at 1683737338.064056

Some scammers often use high-tech terms like neural networks, artificial intelligence, machine learning, and market sentiment in algorithmic trading to deceive naive investors and make unrightful income. This is quite common in Vietnam’s stock market. Investors can save a lot of money by knowing the 07 key features of scammers in algorithmic trading.

1. 100% Success Rate

The first rule of a scammer is to appear perfect to the victim, never losing in any trade. This creates an illusion for investors that winning is easy. If an investor sees someone claiming or showing themselves as an absolute winner in any way, they have probably found a scammer.

2.  Fail to Provide a Complete Statement

A scammer cannot have a good transaction statement, so they cannot provide this information. At best, the scammer can only show some profitable trades but never a complete statement.

3.  Always Announce Position Opening/Closing Points Late

The scammer cannot provide real-time position opening/closing points because they do not exist in the system. Instead, they announce the positions after the fact to ensure a 100% success rate.

A typical example is that in a bull market scenario . A scammer will post a chart image like the one above with colorful indicators and claim: bought VN30F1M at 1045.0 points and imply an unrealized profit of 10 points.

The result of this late announcement in position opening/closing is that the unrealized attractive profits are never executable.

There’s a term for this type of scammer: “time machine” traders. They are traders who can buy and sell in the past.

The stereotype for this group is as follows:

  • If VN30F1M increases by 5 points, they announce they purchased at the current VN30F1M price minus 5.

  • If VN30F1M decreases by 5 points, they announce they shorted at the current VN30F1M price plus 5.

4.  Hyperactivity

Scammers need to constantly impress and reassure their investors with their fake ability to generate high returns and consistent wins. To keep up the illusion of stability, scammers will devote most of their time to providing false information that shows a steady win every day. In some extreme cases, scammers will claim to have made a profit every 15 minutes or less.

5. Lead to Internal Channels

Scammers rely on “service fees” as their income source. They have to persuade inventors to join some exclusive private channel. In Vietnam, these channels are usually chat groups like Zalo or Telegram. Scammers will use various tactics within the private chat group to extract “service fees” from investors. Some other scammers may offer complete investment authorization services where investors may never get their investment back.

Note that in private channels, about 95% of all accounts are fake and are controlled by scammers to create a bandwagon effect. This effect is meant to convince the victim of the scammer’s superior skill and make it easy for the victim to fall for the scam.

6.  Personal Attack Right After Bei Criticized

A perfect image is crucial for attracting more victims, so any criticism will be taken very personally by the scammer. This is a hidden feature that investors can test to see how scammers react. Remember scammers often control multiple accounts to ensure their majority in any argument.

7.  No Programming Skills

Since scammers spend most of their time and energy in luring naive investors, scammers won’t have any time to learn or practice any programming skills. This group usually has no programming knowledge or skills at all. A simple direct question on programming will usually be ignored.

The philosophy of scammers is to make naive investors believe in the possibility of making money quickly without any risk. By understanding the philosophies of algorithmic trading scams and the characteristics of scammers, investors new to algorithmic trading can avoid falling into these traps.