Appendix B: Checklists and Worksheets

Tear these out (metaphorically) and use them. They're the operational core of the book.

Vendor due-diligence checklist

Ask in writing. Score the answers. Walk away from evasions.

[ ] Track record is third-party audited, with monthly returns including losing periods (not screenshots)
[ ] Sharpe ratio stated; between ~0.5 and 2.0 is plausible, above 3 is a red flag
[ ] Maximum drawdown and longest recovery time disclosed
[ ] Backtest is survivorship-free (delisted/bankrupt securities included) and point-in-time (no future information)
[ ] Number of strategy variants tested disclosed (multiple-testing inflation accounted for)
[ ] Results are net of all costs: commissions, spreads, slippage, data, subscriptions
[ ] Named humans with verifiable regulatory registrations (check Investor.gov)
[ ] Withdrawals unrestricted: no lock-ups, advance fees, or gates
[ ] Stress-event behavior described: kill switch, position limits, overnight exposure
[ ] Vendor's compensation disclosed; own-capital participation stated
[ ] Data and methodology describable at a conceptual level (no "proprietary AI" hand-waving)

Scam red flags

One flag: investigate. Two: walk away. Three: report.

[ ] Guaranteed or fixed daily/monthly returns promised
[ ] "Rent-a-bot" or "profit box" pricing
[ ] Recruitment via WhatsApp/Telegram groups
[ ] "SEC regulated" claims you can't verify on Investor.gov
[ ] Form D brandished as proof of approval (it's just a notice filing)
[ ] Advance fees required to withdraw your own money
[ ] Referral/MLM commissions for recruiting others
[ ] No named, registered humans behind the operation
[ ] Overseas operators, no domestic accountability
[ ] Pressure tactics: countdowns, "spots remaining," urgency to fund now
[ ] No audited track record net of costs

Fee worksheet

Fill this in before funding anything. Be ruthless.

Cost	Monthly	Annual
Subscription/software	$	$
Commissions (est.)	$	$
Spreads + slippage (est.)	$	$
Market data / API fees	$	$
VPS / cloud hosting	$	$
Borrow / margin costs	$	$
Total all-in cost	$	$
Account size		$
All-in cost as % of account		%

Rules of thumb: if all-in costs exceed 2–3% of the account annually, the strategy needs a genuine, persistent edge just to break even. If a flat fee alone exceeds 5% of the account, the math is prohibitive: fund more capital or don't start.

Tax pre-flight

Answer before running anything high-turnover in a taxable account:

[ ] Expected after-tax return computed (short-term rates up to 37% federal + state)
[ ] Compared against a tax-efficient buy-and-hold alternative
[ ] Wash-sale exposure mapped across all accounts, including spouse's and retirement accounts
[ ] No strategy activity inside IRAs that could permanently destroy losses via wash sales
[ ] 1099-B reconciliation plan exists for multi-account activity
[ ] CPA consulted (especially before considering Section 475 mark-to-market election)

The satellite-account rules

If you run an AI trading satellite alongside your core plan:

Separate account: separate mental ledger, never commingled with retirement or goal funds
Hard funding cap, set in advance (common ceiling: ≤5% of investable assets)
Kill switch tested before first live trade: one action flattens everything
Daily loss limit coded in: the system halts itself, no discretion
Position caps: no single position can endanger the account
Paper-trade first, for months: to test plumbing and discipline, not to prove profitability
Quarterly review against the after-tax benchmark: shut down what doesn't earn its keep
Core funded first: the satellite never gets money the plan needs

Sources and further reading

Public sources consulted for this book (late 2026). Verify current details before acting. Vendors change terms frequently.

Regulatory: SEC.gov (FY2026 exam priorities); FINRA.org (Notice 24-09, 2026 Oversight Report); ESMA (MiFID II Article 17); EU AI Act (Regulation 2024/1689)
Institutions: Reuters (Jane Street revenue reporting); company disclosures (Virtu Financial); industry analysis (Lowenstein Sandler alt-data survey 2025)
Retail tools: vendor sites for Trade Ideas, TrendSpider, Tickeron, Danelfin, StockHero, Composer, OptionAlpha; Condor Capital robo-industry reports; MarketWatch (AI vs. robo-advisers, July 2026)
Research/AI: Bloomberg (ASKB, BloombergGPT statements); Nasdaq (execution algorithms, Verafin); arxiv.org (options-pricing ML papers)
Scams/enforcement: SEC litigation releases (Cryptoaiml/TSAI, Sept 2025; Delphia/Global Predictions, Mar 2024); FBI IC3 2025 report
Methodology: practitioner literature on backtest overfitting, survivorship bias, and walk-forward validation (see chapter references)

Thank you for reading.