The Truth Exposed

 

Printed from http://www.wickedprofits.com/accurate.html

 

Many advisory services use a variety of deceptive and misleading tactics to get you to join their service.  We will talk about a lot of them on this page including:

 

Wicked Profits uses none of the tactics listed above to mislead you into joining our service.

 

Tight on time?  Click below to jump to our summary:

Seven things that must be true in order to accurately replicate a site's past performance numbers

 

The first misleading tactic some services use is incorrectly calculating overall returns.

Some sites post yearly returns of 200%, 400%, 600%, or even 1000%!

But, don't these returns seem a little too good to be true?

Well, they usually are and we will show you why.

Some sites even guarantee that if the returns posted on their site are not at least a certain amount for the year (i.e. a 100% return), they will refund your money.

But, based on the way some calculate their total return for the year, it is almost impossible for them to ever make less than their guaranteed return.

The guarantee is just another trick to lure you into joining.

 

Incorrectly Calculating Past Returns

When a company states they had a return of 1000% for the year, most people believe this means, if they started off with $10,000 and invested in all the recommendations given on the site, they would now have $100,000.

But this is not the case based on exactly how they calculate that 1000% number.

A lot of recommendation services calculate their yearly return by adding together all the individual returns on each trade recommended for the year.

So, for instance, if a website recommended 100 trades for the year and each trade made 10%, they would claim they made 1000% for the year.

It seems to make sense right?  Wrong!

Their fuzzy math is a common trick used in the industry to entice you into joining their website.

Here is the truth.

The returns on trades that overlap CANNOT be added together.

For example, take a look at this.

A website recommends 5 trades in January.  Here are the returns:

Entry Exit Return
1/5/02 1/24/02 6%
1/8/02 1/21/02 11%
1/10/02 1/19/02 9%
1/11/02 1/23/02 12%
1/13/02 1/15/02 3%

So, based on these returns, they would say, they made 41% in January.  They simply added together the return on each trade.

Unfortunately, this is ridiculously far from the truth.

Let's say you started trading with $10,000 and you invested the same amount in each trade ($2000).

You would have made the following:

Investment Return Profit
$2000 6% $120
$2000 11% $220
$2000 9% $180
$2000 12% $240
$2000 3% $60

This is a total profit of $820 for January.

But wait, 41% of $10,000 is $4100.

What is going on here?

The problem is that, trades that overlap only involve a portion of your entire capital.  In order to accurately figure out the total portfolio return on trades that overlap, you must use the AVERAGE percent return and not the TOTAL percent return.

You REALLY made 41% / 5 = 8.2%.  8.2% of $10,000 is $820.

In our example, using just 5 trades, there is a 32.8% difference between what you REALLY would have made and what they claim.

Now, think how grossly inaccurate the yearly return will be on a site that has made 150 trades for the year!

Many sites do not account for trade overlap.

Incorrectly calculating returns on trades that overlap is especially common for services using "averaging down" (and "averaging up") as part of their trading strategy.  Averaging down is when you buy more of a security at a lower price than where you originally purchased it to reduce your average cost in the position.

The reason why averaging down is problematic when calculating past performance is because some services fail to apply additional weight to trades which were averaged down when calculating the overall return.

For example, imagine that in January you started out with $1400 in risk capital.

For trade #1 in January, you bought 100 shares of ABC stock at $5 (for a $500 investment) and you sold it at $6 for a $100 gain or 20% profit on your $500 investment.

While that trade was still opened, you bought 100 shares of XYZ stock in January at $5 (for a $500 investment) and then another 100 shares of XYZ a few days later at $4 due to the stock dropping (for a total investment of $900).

Your cost basis per share for the position in XYZ is $4.50 (($4 * 100 shares + $5 * 100 shares) / 200 shares).

Now, let's say XYZ moves from $4 to $4.50 and you sell.  You close the trade during January at $4.50 or a 0% return (your cost basis was $4.50 and you sold it for $4.50).

To calculate the January return, some services will simply take the average between the two positions (the ABC and XYZ trade) and report a return of 10% ((20% + 0%) / 2).  This is incorrect.  10% of $1400 = $140.  But you only made $100.  (($100 / $1400) * 100) = 7.14%.

Of course, this is assuming you had enough risk capital to buy another 100 shares of XYZ.  If you did not, your return would actually have been 5% since you invested $1000 total and on ABC you made $100 and on XYZ you lost $50.  (($100 - $50) / $1000) * 100 = 5%.

Later on, we will talk about how averaging down can be used in a different way to artificially adjust performance numbers.

 

Using guarantees to promise future gains

Thanks to the "fuzzy math" trick, many sites using it post money back guarantees.

"If we don't show a return of X amount each year (or each month), we will refund your money for the entire year (or month)."

On sites that use fuzzy math, you have little chance of cashing in on this guarantee.

Some sites will not live up to their guarantee regardless of what returns they post.  They just close up shop and start again under a new name or they simply ignore your emails and phone calls begging for a refund.

As we touch upon later, what are you going to do when a service forces you into a one year membership for $5000 guaranteeing you a minimum return of 200% in your first 3 months then, 3 months later, simply refuses to give you a refund when they lose 75%?  Will you post a complaint on a message board?  Will you call your credit card company that kindly informs you that you are outside the 60 day dispute period?

You are stuck and they know it!

One well known software company has a performance guarantee in which they promise you will be profitable with their software.  Then, a few paragraphs below this, in their disclaimer, they state they cannot guarantee profits if you use their software.

Not only is a guarantee like that another misleading trick, it also is a big no-no in the eyes of the Securities Exchange Commission.  The SEC frowns upon a guarantee of any kind being posted on an investment site.

In fact, misleading returns have gotten some services in legal trouble.  Some of our current competitors have been sued by the SEC for violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 there under and violations of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.

Their misleading calculations are nothing more than a weak attempt to deceive you into joining their service.

 

Artificially inflating their win ratio and past performance by holding losing positions indefinitely

The next tactic some sites use is meant to artificially inflate a service's win ratio.

Some sites claim to have ridiculous win ratios like 100 winners and 0 losers since inception.

What may not be obvious to you is that a majority of the sites claiming unbelievable win ratios hold trades that move against them for many months while new recommendations continue to be given during that time.

To you, it really doesn't matter what other trades are recommended during that time or what alleged returns are made because your capital is tied up.

It may look good to report a win ratio like that but it is not at all realistic.

 

Recording returns on trades that were unlikely to have been executed by customers due to money constraints or time constraints

One website, for example, that does one trade a month had a losing trade at the beginning of the year that was held the entire year and ultimately closed at the very end of the year for a breakeven trade.  Yet, during that entire time, new trades were opened each subsequent month.  So, they reported a 100% win ratio and a very good return for the year.

The problem is that, realistically, you would not have made a dime since all your capital would have been tied up in the losing trade all year.

A website may try to side step this technicality by stating they may open multiple trades at a time, say 10.  There is nothing wrong with that except for the fact that, if you wish to mimic their performance, you can only invest a maximum of 10% of your capital in each trade.

So, if you have $100,000 to invest, you are investing $10,000 in each trade.  However, if most of the time you are actually only in 5 of the 10 possible open trades, you are only making a return on $50,000 of the $100,000.  You can't start investing more because as soon as you do, 10 trades may be opened at once and then you will miss trades.

 

Basing returns on unrealistic entry and exit levels

Other services post returns based on "maximum potential" or "potential profit" meaning what you "could" have achieved assuming you sold at the highest point the trade was open or bought at the lowest point (completely unrealistic).

Gains should not be based on entry to "peak value."  They should be based on clear instructions on when the service told you to exit.

 

Failing to adjust trade results to account for partial executions and slippage

Markets can move quickly due to a variety of reasons like earnings, interest rate changes, sudden news announcements, etc.

In a fast moving market, it is unreasonable to expect that you will get a complete execution at exactly the price you want.

For example, a service may state to buy ABCD if it breaks out above $50 using a buy stop.  If the stock is at $49 and a sudden positive news release occurs, the stock may spike from $49 to $51 in a very short period of time.  As a result, your buy stop at $50 may not actually execute until $50.30.

However, the service may end up recording the buy price as $50.  This is called slippage and must be accounted for.

Or, in another example, ABCD is trading at $40 and a service recommends buying at $39.50.  So all their customers enter a buy limit for $39.50.  Let's say this represents 10,000 shares.

The stock might drop to a low of $39.50 for a second and execute only 1,000 shares before rallying.  This is called a partial fill.  It would be wrong for the service to record the execution at $39.50 without accounting for the fact that it was a partial fill.  Yet, many companies won't make any adjustments whatsoever.

 

Showing past performance going back years before the service even opened

Be careful of services that post returns many years before the service even began.  If the service opened in 2005 and they have returns posted beginning in 2000, there is something fishy going on.

The opposite is also true.  If a service opened in 2000 yet only has returns going back to 2005, be suspicious.

One service in particular that routinely copies various ideas from our website decided to take a page out of our book and start warning people regarding accurate returns.

Although it is imperative that the public be aware of deceptive reporting, the service should probably practice what they preach.

The service talks about how many companies are dishonest and use a variety of tactics to disguise their weak performance (sound familiar?).

The company then goes on to boast that they are not afraid to show you all their results, winners and losers.

What this service neglects to tell you is that they had another prior service that experienced a very bad losing streak.  In an effort to hide this losing streak, at first, they decided to start anew and post only performance that occurred after the bad drawdown period.

Possibly due to complaints, they then decided to post all their performance but they "hid" their bad performance in a different location.

After determining this was not sufficient, they decided to completely abolish all the performance, re-title their strategy, change their business name, and start all over.

Although this service does routinely replicate aspects of our site (as does many other websites), it was one of the few that we actually respected when it came to honest reporting.

However, after this stunt, we can add yet another service to a list of others that decide to put honesty and integrity in the back seat and profits in the front seat.

Wicked Profits has actually been criticized for posting all performance numbers going back to the very first day we opened.  Some people feel every slight change we make to the service should result in a "reset" of our returns.

 

Resetting past returns after a large drawdown / Altering past performance numbers that were previously published

One service we know of posts hypothetical results that change each time the service has a bad month.  What happens is, when a bad month occurs, they just re-optimize their system, fix the bad month, and post new past performance numbers.

 

Selectively posting big winning trades while hiding overall performance which includes unprofitable recommendations

Beware of services that post only a few big winners but hide actual performance numbers.  Nobody cares about one trade that made 40%.  What about the next four that each lost 50%?

You want to see overall performance....not the biggest winners for the year.

 

Basing returns on hypothetical or back tested results

There is nothing wrong with showing back tested results or hypothetical results as long as a service clearly states that the results shown are hypothetical or back tested results.

The problem, for you the customer, is they mean nothing.  With back tested results, it is very easy for a service to produce a winning system based on curve fitting (or creating a system based on past market history to closely take advantage of that history with the benefit of hindsight).

A simple example of curve fitting would be something like developing a system that called for you to short the market on 10/10/07 and called for you to close your short position for a massive profit on 3/6/09.

That's fine except for the fact that you are developing a system based on hindsight knowing exactly where the market bottomed and where the market topped.  Markets do not remain static.  They constantly change.  To expect that the system now would perfectly time a move like that in the future is unfounded.

This is why so many back tested systems quickly fail.  They are based on the past, not the future.  And, they are too closely tied to the specific stock market movements in the past instead of being fluid with the market.

Hypothetical returns are returns on trades that never actually occurred.  Again, if a service clearly says the returns are hypothetical, they are being honest.  However, to you the customer, you have to take hypothetical results with a grain of salt as real trades and hypothetical trades can vary greatly.  You should not expect to match the returns of hypothetical trades as too many factors exist which could cause your results to be significantly different.

In fact, the CFTC requires services under their jurisdiction to post long disclaimers related to hypothetical results due to their misleading characteristics.

 

Posting performance numbers in contrast to actual entry and exit instructions given

One website, that sells unsecured options and performs credit spreads, often posts performance numbers contrary to the instructions given to customers. 

They issue a recommendation to close the open trade because it is moving against them.  But, if at option expiration, the position would have ended up expiring worthless, they will update the return to reflect a profit reasoning that if you went against their instructions and just held the trade, you would have made a profit.

 

Using testimonials to conceal poor performance

We respect sites that choose to post no returns at all since at least they are hiding their performance as opposed to trying to manipulate it.  If a site does not post past performance but instead uses testimonials to get you to join, you should move on.

A service with good past performance should let the numbers speak for themselves instead of relying on testimonials from people that had one good trade and decided to email the company.  If the numbers are good, no testimonials are needed.  If the numbers are good, why not post past performance?

In fact, the SEC actually forbids registered investment advisers from advertising their services using testimonials.

 

"Averaging down" or "averaging up" trades repeatedly to cover up losing positions

Watch out for services that repeatedly "average down" (or "average up") in order to avoid posting losing trades.  Averaging down, as we defined before, is when you buy more of a security at a lower price than where you originally purchased it to reduce your average cost in the position.

Earlier, we talked about how services averaging down may incorrectly calculate past returns.  Now, we are talking about using the average down strategy to completely hide bad trades all together.

While there is nothing inherently wrong with averaging down, it becomes a problem when you are expected to have an unlimited stream of risk capital to keep buying the same size position over and over again to adjust your average entry price.

For example, although you may see a breakeven trade on a company's past performance page, what you may not know is that the position was averaged down three times before ultimately being closed which means if you did not have the ability to buy the exact same size position as your original three more times, your return would not match the return posted.

 

Rolling over option positions to avoid recording a negative return

The next gimmick that companies use to manipulate their past performance is known as the "rollover" trade.  This applies to services that recommend option trades.  Many services refer to the use of a rollover as a repair strategy.

Since options expire, you can only hold them for so long.  This means that if a currently open option trade is losing badly and it is time for that option to expire, the trade has to be closed or settled and the loss has to be realized.

A rollover is when you close an option position and then immediately open a new option position similar to the original with an expiration date further into the future.

Notice in the statement above, we clearly defined a rollover as when a current position is CLOSED and then another similar position is opened.

For some reason, many services believe that a rollover is the same trade meaning they don't have to mark it as a loss and record it as such until they decide to stop rolling the position.

So, what a service will do then is keep rolling over a losing position again and again or just one time but with an expiration date very far into the future.

The goal is to keep the trade open until the position actually turns profitable, until the loss becomes small enough that they are willing to report it, or until all the customers that know about the open trade have cancelled.

When new customers join that aren't aware of the trade, it can just "disappear" from the books and nobody will be there to dispute it nor will it ever be recorded as a loss.

Most services purposely make no indication in their performance that a rollover occurred.

What some services want you to wrongly believe is that by doing rollovers, they are "protecting you" and "not giving up" so as to avoid taking a large loss.  However, what they fail to realize is rolling over a losing position for say a 50 cent profit is no different than simply opening a completely different, better trade for 50 cents.

They want you to believe they are "looking out" for you by refusing to realize the loss but that is an extremely dangerous and stupid stance.  This is no different than a person that buys a stock at $50 and says he will sell for a loss at $40 but instead of selling, says I will hold it and hope it comes back into profit when it goes to $30.

Compare that to the guy that accepts his loss and moves on to find a much better trade.  So why continue to adjust and mess with a losing trade when you can go out, find a much better trade, and make the same amount?

Any service that claims they rollover to protect you and to avoid large losses either doesn't understand what a rollover is or are simply trying to mislead you into believing they know some magical strategy that can turn a losing trade into a winning trade like the guy that holds...and holds....and holds....a losing stock because he "knows" it will turn around.

 

Combining unrealized profits with realized losses on rollover trades

Another way a service can use rollover trades to distort their returns is to offset the loss of one credit generating trade with the possible profit of another credit generating trade in the same month.

I don't want to get too technical but a credit generating trade is one that does not require money to open but rather brings you in money when you open it.  You do however have to put up collateral in the form of cash just in case the trade is not profitable.

Although the possible profit you can make on the trade is immediately reflected in your account when the trade executes, the profit is not realized until the trade is actually closed or expires.

Let's look at an example to illustrate how this technique is used in real life.

Let's say a service takes a 50% loss on a particular trade.  They issue a new rollover recommendation which may generate a 50% profit when it expires 6 months from now.

Instead of recording a 50% loss now and then 6 months from now a 50% profit, they record both returns in the same month.  Then, if the new trade is successful 6 months from now, instead of showing a 50% profit, they show 0%.

Essentially, they therefore claim the rollover trade allows them to time shift their possible profit 6 months ahead.

If they want to record returns based on the date the credit is brought in (when the profit is still unrealized) as opposed to the date the trade is closed, that's fine assuming that they are consistent in doing this and they do not record the return until it is actually realized.

But it is wrong for them to record the return on one trade based on the date it was closed and another based on the date it was opened, especially when the open trade's possible profits have not yet been realized.

Imagine this scenario:

1) You open a credit type trade in December

2) You close it in January for a 40% loss

3) You open another trade in January that makes you a 40% unrealized gain immediately but will not be realized until option expiration in February.

If you record returns based on the closing date, you would have a -40% return in January and a +40% return in February (assuming the trade is profitable).

If you record the returns based on the date the trade is opened and the credit for the trade is brought in, you would have a -40% loss in December and a +40% gain in January.

You cannot however include both numbers in the same month.  Yet many services do just that to hide the loss.

But besides that, there arises two more problems when rolling over a losing position.

The first problem is that the service will continue giving new recommendations the entire time the rolled over trade is open.  So, while you are stuck in this trade, they just keep recommending new ones and recording the performance of those trades even though you cannot take part in them.

The second problem is that when a position is losing badly, since you are closing one position and opening another when rolling over, your balance is going to drop.  It then follows that to perform the sequential trade in the rollover with the same position size as the original trade, you must deposit more money into your account.  That new capital now becomes risk capital susceptible to loss.

Even if a service wants to argue that they said to always keep, for instance, 30% of your total account balance on the side to handle any possible rollovers, every month in which no rollover occurred, they would need to reduce the return by 30% since that money was sitting on the side doing nothing.

If a customer ignores these directions and is invested 100%, they are unable to take part in any new rollover alerts.

While Wicked Profits does mention that a customer may want to keep money on the side for money management purposes, we never force them to by suggesting that we may suddenly issue a new alert which would require additional capital.

Our recommendations are never modified, adjusted, or rolled over so you could invest 100% of your cash if you wanted and you can rest assured that a sudden trade modification alert is not going to occur.

Say, for simplicity, you were in a position which had an open unrealized loss of 100% and it was option expiration.  In an open and honest world, the service would record that loss as 100% and try better the next month.

In a dishonest world, the service would instead issue a rollover recommendation, not record the 100% loss, use the possible profits of the next trade to offset the loss, and claim the trade is still open.

The scenario I state above is exactly what one service did.  They gave a recommendation which was worthless at option expiration.  Instead of recording it as such, they issued a rollover recommendation the day of option expiration, after the stock market had already opened, to manually rollover the losing position into the following month.

The loss they posted ended up being about 1/3 the true amount.  But even worse, the new position they opened had no upside.  It had downside of 100% but no upside.  It was done only in an attempt to hide the first loss and reduce its size.

You place new trades to make a profit not to reduce a loss.  Besides that, nobody could even make the new trade because in order to do so, they would have had to deposit new money since they lost their original investment on the first trade that was closed.

Assuming the investor did have enough money to rollover the trade and assuming they were available intraday to take the alert and assuming the trade was executed, what was the outcome?

They took another huge loss of 90%+.  The new trade that was opened was almost a total loss.  This means whatever additional money you added to your account to make the new trade would have been lost.  Yet, you don't see that loss in their performance nor do they indicate that any trades were rolled over in the first place.  In fact, we see a hefty profit.

Even if you took a 20% losing trade and rolled it over and made a 20% profit, you cannot say you broke even! Since the second trade had less capital invested than the first, you did not offset the first loss.  If you lose 20% on $10,000, you lose $2000 so now you have $8000.  If you make 20% on $8000, you did not make back $2000, only $1600 yet many services will say it is a breakeven return.

By the way, you also increase your risk on a trade by rolling it.

In some instances, depending on the strategy, size of the initial loss, and how the position is rolled, it is possible to roll a losing trade and turn it into a winning trade without requiring any additional capital.  However, by doing so, what you will do is take on enormous risk and create the potential for an even larger loss simply because the service won't cut the trade loose and post the return.

Let's continue the example above.  Instead of rolling over a trade and targeting a 20% profit, let's target a 40% profit.  So, 40% of $8000 is $3200.  $3200 - your initial $2000 loss = +$1200 possible profit without investing a single new dime! But now your risk has increased significantly.  There is a very high likelihood of you losing even more money.

The more you try to recover your initial loss via a rollover, the more risk you take on because you increase the likelihood of taking a bigger loss.

Look, a service that issues rollover recommendations in an attempt to avoid posting a loss is manipulating you and their performance.  Sometimes you just have to close a trade, take a loss, and admit the market was right and you were wrong.  This way, you can clear your head and evaluate a much better trade instead of trying to prove to the market you know more than it does.

 

Showing returns in contrast to actual returns achieved by auto-traders

Auto-traders are those who have their broker automatically enter entry and exit orders in their account when recommendations are issued from their signal provider.

It is unethical and borderline fraud to tell customers that by auto-trading, all entry and exit orders will be placed for them on their behalf in their account and then record returns based on trade recommendations that were given that no auto-trade customer received in their account.

 

Forcing customers into long term, expensive commitments under false pretenses

Be careful of any site that only offers one year memberships (even ones that also include a trial).  They may be forcing you into a one year membership for a reason.  Although you may like the service during your trial, you may not find out that they like to hold losing trades for months at a time until month three which means too late to back out now.

 

Incorrectly using the word "annualized" to predict future gains

Also, beware of the "annualized" trick.  Some sites post "annualized" returns which got one website in big trouble with the SEC.  "Annualized" is worse than "hypothetical" when used incorrectly.

Hypothetical is basically "here is what you should have made if you followed our recommendations but nobody actually traded them so we can't guarantee you would have made exactly what we post."

When used correctly, an annualized return is the average annual return over a period of more than one year.

When used incorrectly, annualized is basically "we had a good trade so if we continue to make these exact same returns in this same amount of time, we will make X amount by the end of the year."

An example of incorrect use is when a site is stating we made 10% in 5 days so at this rate, we expect to make 500% by the end of this year (250 trading days in a year / 5 = 50 X 10% = 500%).  Calculating a return like this is crazy.  Of course, they don't explain it like we just did.  They simply say annualized return = 500%.

This is not the correct use of annualized returns.  Mutual funds use annualized returns but they use it to compute the total return over a period of more than one year so that they can express the return as a per year rate.

Or, in other words, if they made 10% in year one, made 5% in year two, and lost 2% in year three, the annualized (average) return would be (10% + 5% - 2%) / 3 = 4.33% per year annualized.

The annualized return is not meant to be predictive in nature (i.e. we made 6% this month so annualized, that is 12 X 6 = 72% this year).

It is ridiculous to believe a service would actually use this technique but yet many do.

 

Summing it all up

These are just some of the methods other services use in order to achieve too good to be true returns and win ratios.

Companies know 90% of the people out there decide whether or not to join a service based on past performance alone.  They wait to ask questions until they have already joined and are stuck in a losing trade for 3 months while the service continues to recommend winning trade after winning trade.

Wicked Profits is well known by our customers as a company having an enormous amount of integrity and honesty.  We do not play games when it comes to posting our returns, win ratios, etc.  This is why we have so many happy customers and why our service had to be closed from August 1st, 2004 to May 8th, 2005.  In fact, some of our competitors have blatantly copied text from our site in an attempt to replicate our success.

Our customers are well aware that maybe our returns are lower than other services but they are also well aware that our returns are honest, valid, and can be closely replicated.

A return that is five times the return of this service means little if the return is calculated wrong or if you were somehow expected to be 100% invested in 5 recommendations sometimes and other times be 100% invested in 10 recommendations.

A win ratio that is 100% means little if you are expected to have made many trades throughout the year while still being fully invested in a losing trade that was held for 300 days.

 

In order to replicate the past performance numbers posted on a site, seven things must be true:

1)  The returns must be correctly calculated.  This means returns on trades that overlap are averaged (not added) and positions that are averaged down / up or rolled over are weighted correctly.

This also means future potential profits on credit generating trades cannot be used to offset an immediate realized loss.

Services that require you to keep a certain percentage of your account balance on the side for potential trade adjustments (like averaging down), rollovers, etc. must reduce that same percentage from overall returns in which that capital is not used.

If a service adjusts positions or rolls positions, the returns on these trades cannot be included in their past performance unless the rules of the service dictated that the customer keep money on the side, in reserve, and this amount of capital was sufficient to make the adjusted trades.

2)  You must know, beforehand, the maximum number of trades that can be open at a time and all the time, this number of trades must be open.

3)  The returns must not be hypothetical, annualized, or back-tested but rather based on real executions.  This way, slippage is accounted for and customers know that their results would have been the same as the results shown by the service.

4)  Open trades that turn into losers must not be held indefinitely, to hide negative returns, while new recommendations continue to be given.

Services that use the rollover strategy to hide losing positions fall into this category.

5)  Clear entry and exit instructions must be given and the returns must reflect these instructions.  A site cannot give an exit instruction and then, after you exit, post a different return because the trade would have been more profitable if you didn't exit when they told you to.

There should be no ambiguity such as, "depending on your trading style, you may want to sell here or you may want to hold your position."  That is two separate instructions.  You cannot record accurate performance with wishy-washy instructions like that.

There is nothing wrong with giving your clients other options but for performance purposes, you have to stick with one or the other (sell OR hold.....as opposed to after the trade gets over, determining which instruction was more profitable and using that result).

6)  If the service offers auto-trading, the returns posted by the service for a given period should be the same as the real returns members received that were auto-trading during that period.

Further, if a customer that is auto-trading is required to make a trade manually, this trade should not be included in the performance calculations.

Also, if a partial fill situation occurs and auto-traders are only able to execute a portion of their total order, the return on this trade must be reduced by the percentage of the order that went unfilled.

7)  The rules of the service regarding new recommendations must correspond to what the service actually does.

If a service states new recommendations are always given between 4 and 5 PM EST, then new recommendations must always be given between those times.

If a service wants to adjust a recommendation the following day at 9 AM EST because of a change in market conditions, it would be unacceptable to do so since most people would not be able to modify their order.

Similarly, if a service states new recommendations can be given anytime during or after market hours, remember that this means you probably won't be available to trade each recommendation.

 

Wicked Profits meets all seven of the above criteria.

Returns are calculated correctly.

Trades that overlap are averaged, not added.  We do not average down / up positions nor do we rollover positions.

We never try to offset a current loss with future potential profits on a credit trade in order to hide a loss.

Since we do not modify, adjust, or roll positions, you are never required to keep money in reserve. 

As a result, you do not have to worry about whether your reserve is large enough to cover an adjustment nor do you have to worry about having capital on the side which is not invested.

Our customers always know that, during each option cycle, only one trade will be open at a time so that they can be 100% invested if they want (and can match the returns posted on our site).

Our returns are based on real execution prices on real recommendations (not back-tested recommendations).

Losing trades are never held longer than 35 days so capital is never, unexpectedly, tied up.

Since we don't issue rollover recommendations, a trade cannot be rolled indefinitely like some services do.

We give clear entry and exit instructions.  When an exit instruction is given, the performance for that trade is recorded as-is regardless of what happened after the trade was closed.

The return recorded for each trade is based upon the fill price reported to us by optionsXpress as part of our auto-trade service.

Trades that cannot be executed automatically by auto-traders are not recommended.

Slippage is accounted for and so are partial fills when calculating past performance.

All new entry recommendations are given by 10 PM EST so customers do not have to worry about missing alerts.  Recommendations are never given intraday.

All services are going to have losing trades regardless of the strategy they use.  It is hard enough for a customer to deal with a loss but for a service to rub the loss in a customer's face by attempting to hide it is unethical and inexcusable.

Although you may pass on joining this service, we are giving you the above information so at least you can make an educated investment decision when deciding what service you will subscribe to.

Honest companies do exist and Wicked Profits is one of them.  Don't let the big group of dishonest companies mislead you into believing everyone takes part in performance manipulation.  There are still a few of us out there that practice good ethics.

 

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