List Categories | List All Articles | List Articles By Title
How to Analyze the Veracity of Investment Newsletters
When trying to analyze whether a promotional ad for an investment newsletter or a market timing investment trading system is worthy of investigation, the following questions should be asked:
Does the strategy have a track record? Without this you are really allowing your emotions to be in play. All of us want to believe that if someone says something it must be true. Yet the sad fact is the truth is probably just the opposite. Most ads and promotions are put in print for self interests first, and all else second. One has to view anything on the web with a skeptical eye. The minimum that an investment strategy should give you is a previous track record. The longer the track record is the better. Something that has worked for a matter of months is usually not long enough in the trading world to be considered successful. Some promoters do not release their track records because they say that "past performance is not an indication of future results". This is true but certainly no performance is not an indication of future results either. Some promoters do not release their track records because they say "we used to do a track record but subscribers got upset if the strategy lost money when they subscribed even though it made money over a yearly period." That may also be true but it is also part of the game. Subscribers can not expect to make money from day one when trading a long term strategy. However, that should be self evident in the track record. And some promoters do not release their track records simply because they don't have one or they have a bad one. It's as simple as that no matter what they say.
Is the track record that they are promoting in real time or was it simulated in a computer based on past data? What does this really mean? Real time means that the trading signals that were used to produce the track record results were actually generated at that specific moment in time. In reality. Most track records on the investment web sites are not real time even when they say they are. Even if they did not use a computer and it was done by hand, if the data taken from the last five years but the web site is only a year old then it can't be so. Why is this so important? Because trading is not trading if human emotions are removed. No greed, no complacency, no panic, no hysteria. Almost all computer-generated trading programs fail miserably when actually implemented because either the data was too short a time period or the human factor was ignored. That is assuming the human that input the data did it without human emotion. I once had an acquaintance who told me he had a system that returned 80% per month for the last 6 months. He said he implemented it 6 months in real time. I asked how much he had invested in this strategy. He said nothing because he was paper trading. I said that there is no such thing. He proceeded to tell me what paper trading was. I replied that I knew what he thought paper trading was but it is not trading because when you paper trade your emotions are not in play. Human greed and ego has a way of making you believe something to be real without looking objectively at the data. But once actual real money is at risk the complexion of the situation dramatically changes.
How can you tell if the track is in real time if they lie about it being in real time? This is not always easy but there are some basic tell tale signs. If it is a short term system that risks very little and trades often, say 10-50 times per month. Yet it has an 80-90% trade success ratio, which is almost impossible statistically. Most day traders and position traders are doing well if they are winning 40-50% of the time. If they risk more and do not use tight stops, then the win loss ratio goes up but the size of the drawdowns or the size of the largest loss has to go up. Longer term trader may have a slightly better win loss ratio but only if their risk is also larger. To make a general statement, the larger the win loss ratio is the more I would be skeptical.
What if the track record is a combination of partly historically back tested signals and partly real time signals. How should I analyze that? The first thing to look at is if the win loss ratio has changed dramatically over the track record time period. For example, if it is a 5 year time period, and the promoter claims that the trade signals went live 2 years ago yet the win loss ratio changed dramatically only 6 months ago, beware. The hardest thing to detect on the web is when you're being conned about a hypothetical track record because there is no real way to tell when a web sites track record was edited deleted or revised. Some web sites use an independent tracking site but there are no real ways for a consumer to know other than that.
I hope that the previous ideas will help to determine fact from fiction in the world of investment newsletter promotions.
It Must Be Joe Cockers Market
Agonizing displays of poor theatrics failed to entertain my mind one recent Saturday evening. I scrolled across several television channels hoping for an engaging program.
Types of Investment
The word 'investments' is one that most of us are familiar with hearing in financial context. For many of us, it may make us thing of big business and vasts sums of money, but there's much to the world of investments than multi-million dollar deals.
Preparing to Invest: How to get started
Investments can be a source of great potential earnings. The two most common reasons that a person does not invest are either they do not have the money or they do not know how to get started.
Justify Social Security ... Dont Save for Retirement
It is a common question when investors review their retirement plan-should we include social security benefits into our retirement income projections?It seems the closer an investor is to retirement, the more likely he/she will include social security benefits into the analysis. Younger investors, however, may feel compelled to omit such benefits.
For Entrepreneurs A SIMPLE Plan May Be Best
Q: I own a small decorating business and I'll be the first to admit that I don't know anything about taxes or retirement plans. I'd like to set up a 401(k) or an IRA or some other kind of retirement plan for me and my three employees.
Options Made Easy and Investor Education - Simple Enough for a 10 yr Old Kid
How many of you out there think that the market is performing well?How many think the market is performing poorly?And how many feel the markets performance is neutral?Actually none of these answers is correct. You see, learning and reading our options made easy articles, you will realize that the market does not perform, you do.
Creating a Financial Future - Putting Your Plan Into Action Part 1
This column has previously discussed "picturing the future that we desire", and outlining a plan to achieve it. We mentioned that the plan must include goal-setting, measurement, and implementation.
Success Trading: Some Basic Terminology for New Traders
The world of trading can get very complex because the financial markets are complex. There thousands and thousands of successful traders out there today.
Trend following also called momentum trading is the simplest and safest method of stock market investing. It puts you in stocks and mutual funds that are going up and gets you out when they start down.
Many people have, at one time or another, taken some of their hard-earned funds, and decided to put them in the stock market. These well-meaning individuals either acted on a tip they saw on CNBC, or actually believed one of those crazy faxes/emails that said XBXB @ $0.
Porters Five Forces Analysis
If you've ever listened to Warren Buffett talk about investing, you've heard him mention the idea of a company's moat. The moat is a simple way of describing a company's competitive advantages.
Creating a Financial Future--Putting Your Plan Into Action Part 2
Real Estate can be a useful tool for investing. The simplest real estate investment is not truly an investment, but a cost-reduction - that is owning your own home.
Effective Advice For A New Generation of Investors
CATCHING A FALLING KNIFEOne of the most common mistakes made by inexperienced investors is trying to "catch a falling knife". This is a habit, common among new investors, of buying stocks that are in "freefall", and it's a bad idea for an investment strategy.
Is a SEP Plan Right For Your Business
A SEP is a special type of IRA. Under a SEP plan the employer creates an IRA account for each eligible employee, hence the name SEP-IRA.
Credit Scores = ROI Profits for Real Estate Investors
Strong credit saves real estate investors money on mortgage finance costs. A good credit score, along with the other credit and mortgage qualifications, means that investors can pay lower fees for financing, such as points and interest charges.
Wit and Wisdom on Money, Wall Street and Success - Part #2
Here are ten more WISDOM packed GEMS that ooffer very unqiue insights to the world of trading and investing.These quotes promote a philosophy which is readily understandable and sometimes hysterical.
Art Investing for a Financial Future
When we think of investing we probably conjure images in our minds of the New York Stock Exchange, suited stock brokers making deals, bonds and treasury bills, and all manner of financial matters. The last thing we probably think about is art.
Retirement or Financial Freedom?
In the past most people never retired. They died.
Begging Your Trust in Africa
The syntax is tortured, the grammar mutilated, but the message - sent by snail mail, telex, fax, or e-mail - is coherent: an African bigwig or his heirs wish to transfer funds amassed in years of graft and venality to a safe bank account in the West. They seek the recipient's permission to make use of his or her inconspicuous services for a percentage of the loot - usually many millions of dollars.
Investing in Car Dealerships: How to Do It Right
The financial characteristics of the automobile dealership are attractive:". .
home | site map
All articles are copyright to their owners.
Note: this website lists articles, We do not Write Articles !