MUST READ: Don't fall for this way of calculating performance

Some of you might recognize what I'm talking about and some of you won't. Either way you will learn something new in this email and my new video. A few "gurus" calculate their track record is a way that will deceive the average investor. Instead of me saying how it's done, I'll take it directly from their website. I will not reveal who they are because that is not the point. Learning the lesson of why calculating performance this way is wrong is the main point.

Here is what their site says:

*MAX GAINS are based on exiting recommended etf and stock picks at peak value. Percent gain represents the percentage change at the subsequent high value, from the trigger price.

Here are the 3 reasons why it's wrong:

You can't pick the very top or bottom of a move to get your return! I really do hope you understand that. My new video here will show a few example way this is way off: http://www.etftrendtrading.com/free-videos.html
The percentage gain as they clearly say is not the portfolio percentage gain, but the percentage change from the entry to the high value. This is a big difference. If the Spy moved up from a bottom of 67.10 on 3-6-09 to a high of 96.11 on 6-11-09 that is a percentage change of 43.2%. Amateurs who don't read the fine print will think they could have made 43.2%. In order to do that you would have to risk your full account on that one and only trade which is reckless. Plus you would have to of picked the exact top and bottom.
They do not have exact risk stops. This is deceiving in two ways. First price can jump way down before going up and they can say they were never stopped out which is true because they never had a stop in place. This could cause a 20-30% unrealized draw down that would scare most subscribers. Secondly they don't say how big the losses are when they take losses. They could be huge! It's easy for the amateur trader to focus on a 90% win rate, but as I teach my students the win rate is not important if you always risk way more than you gain. What are important are the overall profits vs. draw downs. You can't have the power of compounding if you have large draw downs. Honestly it does not matter if you win only 60% of your trades as long as you make more that you lose each time. Sure that's not as glamorous, but at least you will still be compounding in 5-10 years down the road while those with the high win rate lost their account years ago when they hit a string of large losers. By the way every system on the planet hits a large string of losers in a row, it' sonly a matter of time. Those that took any classes on statistics know exactly what I'm talking about.

I won't even give the breakdown of the huge commission's costs of the 700 trades their signal service gave in under one year. If your account is under 100k you don't have a chance taking that many trades, even if you use a discount brokerage service.

Here is the real way to calculate performance:

Have a clear max percentage stop on every trade and signal.
Have a clear exact entry on every trade. I'll give it to them that they do have this one, but it is only one third of the formula.
Have a clear exact exit and don't calculate the percentage change, only the percentage profit. Percentage changes don't pay the mortgage, only profits do.

That's it. Nothing fancy, only common sense. It also helps if the system is mechanical (clearly defined trading rules), instead of discretionary.

Sure my ETF Trend Trading system performance returns are not as crazy as those trumped up ones APPEAR to be, but at least I have all 3 parts of the above real ways to calculate performance on my daily blog. By the way my daily member blog calls all trades down to the penny, one day ahead of time. Plus 5.7% per month average (including monthly compounding) over 36 months really is not at all bad.

To watch the video click here:

http://etftrendtrading.com/free-videos.html

Your choice, choose wisely.

To slow and steady growth,

Big A

All trading involves risk. Please read full risk disclosure here:

http://www.etftrendtrading.com/risk-disclosure.html

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