Last week a trading-platform newsletter landed in my inbox with a strategy of the week.
The headline: Hypothetical Annual Return (Compounded) +90.2%. Somewhere above it, in smaller type: "All results are hypothetical."
I do not know whether the strategy works. I do know that a monthly percentage table is enough to check the arithmetic, so I checked it.
The table
Two and a bit years of monthly cells, printed right there in the email:
| Year | months (%) |
|---|---|
| 2024 | -3.8, +8.3, -0.5, -7.9, +5.3, +3.9, +4.5 |
| 2025 | +8.5, +0.1, +0.6, +50.7, +7.6, +4.5, +3.3, +10.9, -, +6.2, +12.4, +10.7 |
| 2026 | +14.1, +23.4, -20.9, +20.3, -6.1, -8.9, -3.9, +2.8, +9.3, +18.5, +2.2, +50.1 |
Compound them:
- 2024 (7 months): +9.16%
- 2025 (11 months, September missing): +180.27% — the email prints +180.4%
- 2026 (11 months): +49.9% — the email prints +50.1%
- Full span: roughly +350%, which annualises to ~90.3%
So the +90.2% is not a typo and not a fabrication. The arithmetic holds. That is the part almost nobody checks, and it passed.
What the arithmetic hides
Three questions turn "consistent" into "informative".
1. How much rests on a few months?
The three largest cells are +50.7%, +23.4%, +50.1%. Remove those three months and the annualised figure falls to about 34.8%. The strategy is not a smooth 90% engine; it is a handful of good months carrying a decade of averages.
2. What is the worst peak-to-trough on monthly closes?
-21.8%. And 2026 contains -20.9%, then -6.1%, -8.9%, -3.9% in a row. Anyone sizing this needs to know that sequence exists before they read the annualised number.
3. What exactly is being measured?
The vendor's own disclaimer: "there is no single real-life trading account that looks exactly like the track record shown here." Fees are estimated, not taken from a broker statement. The track record is a model account.
None of that is fraud. It is a hypothetical number, clearly labelled as such, in 8-point type.
The three-question check
For any seller quoting an annualised return:
- Ask for the monthly cells, not the annual figure.
- Compound them yourself. If it does not match, stop and ask why. If it matches, continue.
- Drop the three best months and recompute; compute the worst monthly peak-to-trough.
Two minutes, a calculator, and you learn whether the number is durable or decorative.
I keep the working notes and a small standard-library toolkit for this kind of check in backtest-audit-kit. The write-up for this case is case 15.
If you sell a strategy and your numbers survive these three questions, say so — that is rarer than a 90% headline.
