| |
| |
|
|
Investing Information |
|
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. John McKeon info@buypanic.com http://www.buypanic.com
MORE RESOURCES:
Google News |
|
|
|
RELATED ARTICLES
Investing and the Fear of Regret and Greed People tend to feel sorrow and grief after having made an error in judgement.Investors deciding whether to sell or buy a security are typically emotionally affected by whether the security was bought or sold for more or less than the current price. Before You Start Investing There maybe several reasons why you to want to invest your money. You may want to retire early, want to build your own business in the future, or to pay for your kid's education. Why You Need To Buy and Sell Gold Coins (Part 5) Grading coinsThe condition of a coin is commonly summarized by a grade. Because the value of collectible coins often varies dramatically with grade and overly generous grading is not uncommon, reasonable grading proficiency is an important skill for collectors. Remembering TEOTWAWKI and Learning from It Its only been about 5 years since we had major scares in the marketplace regarding Y2K. You might recall that many computer systems were not programmed to be able to understand the change from 1999 to 2000. Guru Focused: Robert Olstein's Short Sells While it is rather rare that value gurus sell stocks short, Robert Olstein has been selling short in his Financial Alert Fund. The accountant-turned fund manager spots values by looking behind the numbers. Trading Is Not Rocket Science! Despite what some people may lead you to believe; day trading, swing trading and trend trading is not anywhere as difficult as they would like you to think. It really boils down to two key components. Investing Online Has Its Rewards: Find Out How To Take Advantage Of Them Computerized investing. Online investing. Reading Between The Lines In Annual Proxy Statements Upper Saddle River, N.J. Choosing A Financial Advisor With so many financial advisors trying to woo you with their qualifications and experience, how do find one you can trust your finances with? 'Trust' is the keyword here, as you will depend on him/her for your future financial security. A good financial advisor can help you determine which investments are best suited for you, based on your financial goals. 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. Which IRA Is Best For You? An Ira is one of the greatest ways to save on taxes currently and accumulate money for the future.For individuals three types of IRA's will normally come under consideration. Why Should I Use Penny Shares to Build Wealth? A strategic question. Why indeed?1. 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. Trading For A Living - Part 2 In part 1 of this article I started to look at the financial implications of giving up the day job to instead start trading full time for a living. There are more than just monetary considerations as we will see later, but for now, there are some more costs to ponder. How to Choose the Right Share Class You'll want to opt for the no-load or institutional share class instead. If you're a no-load investor who is determined to buy a fund that's primarily broker-sold, go through a supermarket and opt for the D shares. Success Trading: More Basic Terminology for New Traders One important aspect of trading the markets is to understand how to feel it's overall pulse. In the stock market, this is measured by measuring the movements of selected stocks across various sectors to let us know how the market is doing in general. Love The Thrill of Risk? Invest in an Annuity! With the stock market in steep decline, people are looking for safe places to invest their savings. Many banks and investment companies are pushing annuities. Making Every Penny Count More and more workers are leaving their jobs and taking their 401 k retirement plan funds with them. While some are rolling their funds over into IRAs or other qualified plans; many are taking their distributions in cash. Protecting the Tax Advantage of Your Deferred Compensation The American Jobs Creation Act of 2004 imposed strict new rules on non-qualified deferred compensation plans. Beginning in 2005, deferred compensation programs that are not in compliance with the new rules may be taxed as wages, slapped with a 20% excise tax, plus charged an interest penalty. Press Release Scams and Successes: Reading Between the Lines Press releases are a means through which companies can keep the public up to date regarding their recent affairs. It is the duty of every public company to keep its investors and indirectly potential investors aware of what is going on in the company.
|
||||||||||||||||||||||||
