CHAPTER 9: RISK AND SAFETY

Backtesting is a powerful and helpful tool for investment, but it is important to remember that past performance is not a guarantee of future results. While backtesting can provide valuable insights into the potential success of a trading strategy, it cannot predict future market conditions or unexpected events that may impact investment performance. It is important to exercise caution and use backtesting as one of many tools in the investment decision-making process.

There are many reasons why historical performance may not be a 100% reliable indicator of future performance. The economic environment can change, causing different sectors or industries to perform better or worse than they did in the past. Company management can change, leading to different strategies and outcomes. Regulatory changes, technological advancements, and other unforeseeable events can also impact future performance.

Therefore, investors should not rely solely on past performance when making investment decisions. Instead, they should consider a range of factors, including current market conditions, company fundamentals, and macroeconomic trends, to make informed decisions about their investments. Additionally, investors should diversify their portfolios and seek professional advice to help mitigate risk and increase their chances of achieving their financial goals.

And even if you have a good backtesting tool, it is important to regularly update and refresh your data to ensure that your trading strategies are relevant to the latest market conditions and changes.

You may have heard the quote: " Now, if it is to get safely through this perpetual conflict with the unexpected, two qualities are indispensable: in the first place an intellect which, even in the midst of this intense obscurity, is not without some traces of inner light, which lead to the truth, and then the courage to follow this faint light." - "On War" by Carl von Clausewitz

The commander in the field is always in the dark, like a traveler at night. He sees only a few steps ahead, but he must see them. He must have a clear idea of the situation, a plan for how to move forward, and the ability to think and act quickly, because time is a critical factor in war. He cannot hesitate when he sees even a weak light, but must boldly move toward it.

Investing or stock trading can also feel like a battle or war, and backtesting is kind of a glimmer of light in the midst of uncertainty and the dark battlefield. It cannot predict the future with 100% certainty, so the ultimate decision rests with you, the commander, who has intellect can find the “inner light”. It takes courage to advance towards that faint light, and success depends on your expertise, experience, and even luck or fate.

Moreover, software and Internet safety is another issue to be aware of because we need to connect to the Internet to download data often. Make sure your computer and Internet access are in a safe environment. Excel Macros can potentially be dangerous because they can execute any code, including malicious code. Therefore, it's important to take some precautions to ensure that a Macro is not affected by any dangerous outside sources and is safe to run. Here are some steps you can take to help ensure the safety of an Excel Macro:

1.       Enable Macro Security: By default, Excel has macro security settings that block all macros from running. You should enable this security feature if it's not already enabled, and set it to the highest level that still allows you to run the macros that you need.

2.       Run the Macro in a Test Environment: Before running a macro in a production environment, it's a good idea to run it in a test environment first. This can help you identify any issues or unintended consequences that might arise from running the macro.

3.       Use a Digital Signature: If you create or receive a macro from a trusted source, you can add a digital signature to it. A digital signature is a way to verify the authenticity of the macro and to confirm that it has not been modified since it was signed.

4.       Keep your Antivirus Software Up to Date: Make sure your antivirus software is up to date and running at all times. This can help to protect you from any malware that may be embedded in macros. Scan the file with an anti-virus tool and do not download anything from pirated websites.

By following these steps, you can help to ensure that any Excel macros you use are safe to run.

And remember, when it comes to investing, safety is key! So make sure to wear your helmet and kneepads when you're jumping into the stock market. You never know when you might take a tumble, and it's better to be safe than sorry. Plus, if you fall off your chair in excitement after seeing your investments soar, at least you'll have some extra protection. So stay safe, stay smart, and happy investing!