How to Analyze the Veracity of Investment Newsletters?

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.

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