Risk disclosure

Futures trading risk

Trading futures and other leveraged instruments involves substantial risk of loss and is not suitable for every investor. Leverage can work against you as well as for you. You could sustain a loss of some, all, or more than your initial investment, and you should not trade with money you cannot afford to lose. Before trading, consider your financial situation, your experience and your risk tolerance, and seek independent advice if you have any doubt.

Hypothetical performance

Theory of Edge produces backtests, walk-forward results, Monte Carlo simulations and portfolio simulations. All of these are hypothetical performance results. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.

One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. The ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

What the Software cannot do

• It cannot see the future. A strategy that was profitable on past data, in sample and out of sample, can stop working at any time.
• It cannot replicate live execution. Backtests assume fills based on historical bars and the costs you enter. Live fills, slippage, latency, data differences, platform behaviour and your own interventions will differ.
• It cannot remove selection bias. Generating thousands of strategies and keeping the best ones is, by construction, a search for what fitted the past. Out-of-sample validation, deduplication and Monte Carlo reduce this risk; they do not eliminate it.
• It cannot guarantee an evaluation result. Prop-firm simulations apply the rules you enter to historical data. They are not a prediction that an evaluation will be passed, and evaluation fees can be lost.

Not investment advice

Theory of Edge is analysis and strategy-development software. We are not a broker, a commodity trading advisor or an investment advisor, and nothing on this website or in the Software constitutes a recommendation to buy or sell any instrument. Any decision to trade a strategy, to size a position, to open an account or to enter an evaluation is yours alone, as are the resulting profits and losses.