Fits right in with a post we done recently about dodgy vendors.
Bad – Projecting High Monthly Gains on Very Limited Data
This is when people take only a couple months data and then use it to project what the gains month after month for a lot time will be.
Let’s say for example in month one 40% was made in very aggressive trading and then then next month 60% was made.
The monthly average here is 50% but to use this two months of history to then project 50% a month gains is rather ridiculous.
The amount of managed accounts that do well for 3 months or so and then go bad is unbelievable and a couple really good months to start can happen.
(The thing you do not see if the ones that bust on day one or two, they ones are not advertised)
While at least showing some sort of results these are bad because it is really telling you that the manager of the account does not have a good understanding of averaging/probability. A couple months data is nowhere near enough to try to get any idea of what future results may be like.