Risk Disclosure Statement

DRAFT — PENDING LEGAL REVIEW

This document is a template and has not been reviewed by legal counsel. It is provided for illustrative purposes only and should not be relied upon as a complete risk disclosure until reviewed and approved by qualified legal and compliance professionals.

Last updated: [DATE]

Important Notice

Before using Pitonset's trading automation software, you should carefully consider the following risk factors. Trading in securities involves substantial risk and may not be suitable for all investors. You should only trade with money you can afford to lose.

1. General Trading Risks

1.1 Risk of Loss

Trading stocks and other securities involves substantial risk of loss. You may lose some or all of your invested capital. The value of your investments can go down as well as up, and you may receive back less than you originally invested.

1.2 No Guarantee of Profit

There is no guarantee that you will make money using our Services. Many traders lose money. No trading strategy, automated or manual, can guarantee profits.

1.3 Market Risk

Securities prices are affected by many factors, including economic conditions, interest rates, geopolitical events, and market sentiment. These factors are unpredictable and can cause rapid and substantial losses.

1.4 Liquidity Risk

Some securities may have limited trading volume, making it difficult to buy or sell at desired prices. This can result in slippage or inability to exit positions.

2. Automated Trading Risks

2.1 System Failures

Automated trading systems can experience technical failures, including:

  • Software bugs or errors
  • Server outages or downtime
  • Network connectivity issues
  • Data feed interruptions

Such failures may result in trades not being executed, being executed at unintended prices, or positions not being closed as intended.

2.2 Execution Differences

Actual trading results may differ significantly from backtested results due to:

  • Real-time market conditions
  • Slippage between expected and actual execution prices
  • Order queue priority
  • Market impact of your trades

2.3 Over-Optimization

Strategies that perform well in backtesting may fail in live trading. This can occur when a strategy is over-optimized to historical data ("curve fitting") and fails to adapt to future market conditions.

2.4 Model Limitations

The models and algorithms used in automated trading have inherent limitations. They are based on historical data and assumptions that may not hold in the future. Market conditions can change in ways that the models do not anticipate.

3. Backtesting Limitations

3.1 Hypothetical Results

Backtested performance results are hypothetical. They are generated by applying a trading strategy to historical data. Backtested results do not represent actual trading and do not guarantee future performance.

3.2 Known Limitations

Backtesting has significant limitations, including:

  • Survivorship bias: Historical data may not include securities that were delisted or went bankrupt
  • Look-ahead bias: Strategies may inadvertently use information that would not have been available at the time
  • Selection bias: Strategies may be selected based on favorable historical performance
  • Data quality: Historical data may contain errors or gaps
  • Transaction costs: Actual trading costs may differ from assumptions

3.3 Market Impact Not Modeled

Backtesting typically does not account for the market impact of your trades. In live trading, your orders can move prices, especially for larger positions or less liquid securities.

4. Regulatory Risks

4.1 Pattern Day Trading Rule

If you execute 4 or more day trades within 5 business days and day trades represent more than 6% of your total trades, you may be designated a "Pattern Day Trader" under FINRA rules. Pattern Day Traders must maintain a minimum equity of $25,000 in their brokerage accounts.

4.2 Regulatory Changes

Securities regulations can change. Future regulatory changes may affect your ability to use automated trading systems or may impose additional requirements or restrictions.

4.3 Tax Implications

Trading activity has tax implications. You are solely responsible for understanding and complying with all applicable tax laws. Consult a qualified tax professional regarding your specific situation.

5. Third-Party Risks

5.1 Brokerage Risk

Your brokerage account is held with Alpaca Securities LLC, not with Pitonset. Your relationship with Alpaca is subject to Alpaca's terms and conditions. Alpaca is a member of SIPC, which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). SIPC does not protect against market losses.

5.2 API and Connectivity

Our Services depend on connectivity to third-party services, including Alpaca's API. Interruptions in these services may affect your ability to trade or manage positions.

6. Our Company Status

6.1 Not a Broker-Dealer

Pitonset is NOT a broker-dealer. We do not hold customer funds or securities. We do not execute trades directly; all trades are executed through your Alpaca brokerage account.

6.2 Not an Investment Adviser

Pitonset is NOT an investment adviser. We do not provide personalized investment advice or recommendations. The trading strategies you create are your own responsibility.

6.3 No Fiduciary Duty

We do not have a fiduciary duty to you. We are a software provider, not your financial adviser or broker.

7. Acknowledgment

By using Pitonset's Services, you acknowledge that:

  1. You have read and understood this Risk Disclosure Statement
  2. You understand that trading involves substantial risk of loss
  3. You are solely responsible for your trading decisions
  4. You will only trade with money you can afford to lose
  5. You have independently evaluated whether trading is appropriate for your financial situation
  6. You have not relied on any representations from Pitonset regarding potential profits

8. Seek Professional Advice

Before trading, you should:

  • Consult with a licensed financial adviser about whether trading is appropriate for you
  • Consult with a qualified tax professional about tax implications
  • Thoroughly educate yourself about the securities markets and trading strategies
  • Paper trade extensively before risking real money

Contact

If you have questions about this Risk Disclosure Statement, please contact us at:

Email: hello@pitonset.com

This is a DRAFT document. It has not been reviewed by legal counsel and should not be relied upon as a complete risk disclosure.