Stock Market Guides teaches people how to find trade opportunities that have a backtested edge. It’s very important that each customer understands:
- When you make a trade, that is your responsibility. That is not the responsibility of Stock Market Guides. You are fully accountable for any trading decisions you make.
- Even if there is a backtested edge, it doesn’t mean there won’t be losses. In fact, trading strategies with a strong backtested edge can potentially exhibit major drawdowns at times. It’s not impossible to blow out an account. Read this page to understand how.
- Joining this service does not mean you are automatically going to be making millions of dollars. And even if you make nice profits over time, it likely won’t be easy. There is real risk involved. And no matter what trading strategy you use, there are going to be losses at times. Going through periods of losses can be very tough and discouraging.
The bottom line: there is bonafide risk involved with trading! Even when you are making informed trading decisions based on academic research, you are still taking a risk with each trade you make. This type of risk is not suitable for all investors. If you don’t like risk, that’s perfectly ok, but this service might not be a good fit for you.
Don’t trade with money that you can’t afford to lose. It's highly recommended that subscribers "paper trade" when starting the service, which refers to trading in an account with fake money. This allows subscribers to get practice with the trades in an environment where real money is not at risk.
Stock Market Guides relies on backtests for its research. A backtest involves taking any given trading strategy, writing it in code (an algorithm), and applying it against historical prices of stocks to see how the trading strategy might have performed in the past.
Although backtesting offers powerful insights about which trading strategies might have an edge, it's important to understand that backtests are not live results. Since we didn't make these trades live, we can't say with certainty what exactly our entry and exit prices would have been. There are market conditions that could have affected our ability to enter or exit the trades exactly as the backtests show. A sudden lack of liquidity is an example of such a condition.
Another limitation of backtests is that they are performed with the benefit of hindsight. Sometimes being able to see the past can expose you to the risk of “curve fitting”, where a trade strategy can be pinpointed that might generate optimal backtest results but that doesn’t actually have a true long-term edge. We work diligently to minimize this risk by employing stringent statistical requirements for our backtests. It’s nevertheless still a risk involved with relying on backtests.
Backtests don’t account for any transaction fees since those fees vary by provider. That said, in the United States many brokerages offer commission-free stock trading for most stocks.
Backtests also don’t account for slippage (the difference between the expected price of a trade and its actual price).
Another limitation of backtests is that they are created by humans, and therefore subject to human error. There may be errors in our work. We performed some of our backtests using the TradeStation software, and it’s also possible there are errors with their software that could impact backtest results. Stock Market Guides is not responsible for software errors or human errors associated with the backtests.
In addition, backtest results for option trades in particular have even more limitations than those for stock trades. This is largely due to their relatively limited volume and price history. We had to make educated assumptions to perform our option backtests, and those assumptions reflect another backtest limitation.
Please read this to get more information about the limitations of our backtests.
Due to all these limitations, we have to take the results of the backtests in stride. There is no way for anyone to be certain that backtests accurately reflect what live results would have been since they weren't actual live trades. And beyond that, past results aren’t a guarantee of future performance. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website.
The bottom line is that there is real risk involved with taking trades, even when backtest results look encouraging. Stock Market Guides is not responsible for that risk; you are responsible for that risk.
We Don’t Give Advice
Stock Market Guides does not offer investment advice. We don’t have the appropriate credentials to do that. So please keep in mind that when we post trade ideas, we are not advising you to take the trades.
By the same token, if you configure trade alerts, it does not mean you have to take the trade just because you got an alert.
It is up to you to determine what your own risk preferences are and whether to consider any given trade idea you find from our service. The trade opportunities we post are for illustrative purposes only.
We are also not tax professionals or legal professionals. We don’t give tax advice or legal advice. In addition, Stock Market Guides makes no claims as to the tax implications of any of the trade opportunities we post, and therefore we are not in any way responsible for the tax impact of any trades that customers make.
You are still welcome to ask us any questions you want, but we will be unable to offer any sort of advice in any of our responses.
This website is not a solicitation to buy or sell futures, equities, or options.
The service we offer at Stock Market Guides is published for individuals residing in the United States. Stock Market Guides makes no representation that our service is appropriate for users outside the United States or permitted under the laws of other jurisdictions.
If you choose to access or use our service from a location other than the United States, you do so at your own initiative and risk, and you bear full responsibility for compliance with any applicable local laws.
Our service uses data suppliers for our real-time price and indicator information. We use the Finnhub Stock API as well as the EODHD API. Stock Market Guides is not responsible for any errors or omissions that are a result of their data services.
Through our proprietary scanner, we share backtest data with customers for each trading strategy and each ticker symbol. Sometimes, the data shared may not be statistically significant. For example, maybe for one particular trading strategy, the ticker AAPL had 4 wins and 0 losses in backtests. That’s only four data points, and that may not be enough information alone to be used as a basis for making a trading decision. Our objective is to put all the backtest data at your fingertips, but it is up to you to decide which trade set ups are actionable.
The backtest results we display are based on adjusted close prices. Data is adjusted using appropriate split and dividend multipliers, adhering to standards set forth by the Center for Research in Security Prices (CRSP).
Our stock picks and options picks may overlap earnings announcements or ex-dividend dates. You are responsible for the trades you make, and therefore you are responsible for considering those dates before making any investing decisions. We use a data feed from EODHD to provide customers with upcoming earnings announcement dates and ex-dividend dates.
Our backtests of options trades sometimes simulate holding the position until expiration for the purpose of clearly quantifying the backtested edge. In live trading, failing to close an option position before it expires could, in some circumstances, expose you to the risk of assignment. A position can simply be closed at any point prior to expiration to mitigate that risk.
In addition, holding certain options positions at the time of an ex-dividend date can expose a trader to the risk of option assignment. To avoid that risk, a trader can avoid taking on an options position that overlaps an ex-dividend date.
Our backtests for some day trades involve holding the position overnight for one night. They are therefore not day trades in the classic sense of opening and closing the position on the same day. We use a less strict definition here and think of day trades as any trade that held for a maximum of one day (which means one overnight hold is ok). These are intended to be very short-term trades.
Customers have total control over their trades and can of course close the trade the same day they entered it if they want. But if they hold it overnight, as was simulated for some trades in the backtest, then they will be exposed to overnight risk and will not be able to use day trade margin buying power.
For traders who do more than three trades in a week where the entry and exit of the trade take place on the same day, they could be subject to the Pattern Day Trader rule. That rule requires that you have at least $25,000 in your account if you do more than three same-day roundtrip trades in any given one-week time period.
Personal Use Only
Our service offers proprietary research and tools. It is intended for personal use only. Customers may not share this information in any sort of commercial way. Please do not sign up if you think there is a chance you might be inclined to monetize this information by selling it to others.
This brief statement does not disclose all the risks and other significant aspects of trading futures, options, and equities. The service at Stock Market Guides is strictly intended for educational purposes.