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Marketpit.com may be rendering general financial advice and are not registered investment advisors, certified financial planners, or licensed to trade in securities of any kind in any markets. The information in Marketpit.com and its Webpages is general in nature. Any information presented is believed to be from reliable sources but no guarantee is given as to its accuracy, completeness, quality, or adequacy.
Any trading systems or other vehicles for trading are presented without any claims and are for general use. Historical results are not indicative of future results. All and any trading in any markets involves risk, including the risk of complete loss of invested capital and/or more than that invested.
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Further disclaimer information:
Read the following disclaimer (kindly provided by the National Futures Association, NFA): "...Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown."
Backtesting holds two pitfalls, as the NFA's disclaimer implies. The first is that people tend to write systems intentionally to fit the data. The second is even if they are not familiar with the data, they will keep fostering ideas or fudging parameters that eventually do fit the data. So out of 50 attempts, one will fit.
And think of those poor instructors at universities and major exchanges (this writer among them). They are always in competition with other seminars run by institutions as well as software companies and self-proclaimed gurus who offer secrets and seasonals that shamelessly profess indisputable success and riches.
While it may be obvious to the majority of readers, many, particularly new ones, must learn to separate infomercials from legitimate education. Trading is an evolving skill, not a static task like lacing your shoes. You can attend all the skiing seminars you want, develop a plan, even backtest your run. But when you get off the chair lift, you are in a dynamic world. Real snow.
But just like skiing, most people can become quite adept at trading if they take the time to do it right. Knowledge, understanding and common sense are the overall principles -- just as they are in running any business successfully. These guidelines can help:
* If you trade volatile markets, such as the S&P 500, off the floor with less than $30,000, know where you are in the food chain or you will be eaten alive. To trade on the floor of the Chicago Mercantile Exchange (CME), you need a $50,000 cash account plus the cost of your seat. Can you go up against that kind of fire power?
* Only trade with money you can afford to lose. Be sure you have little credit card debt and that you know why you are trading. According to a recent study by the University of Illinois done in conjunction with Merrill Lynch Futures, most speculators are trading for the action not the money -- a sure way to blow out.
* You cannot make up for years of not investing by suddenly trading your way to wealth. If there was a great system, it would not be sold. Never believe the nonsense that gurus want to help you because of their generosity and magnanimous natures. They like money just as much as anybody. Like Levi Strauss learned, there is more money in selling tents to gold miners than mining the gold yourself.
* A good broker is worth more than any software program. Paying for a full-service broker who does not encourage trading every day may be your best investment if you are new to the business. Experience does count.
* Keep your first charts by hand. And keep in mind there may be an inverse relationship between the real value of a software program and marketing. Know the bugs or assumptions in the software you purchase. Ask yourself whether you are spending time and money learning how to use software or learning how to trade. If you don't know how the market works, even meticulous backtesting won't prevent disaster. No software program can take the place of sound money management.