Learn investing: plain-English guides
Plain-English guides to the ideas behind investing and trading. Each one answers the question first, uses a worked example, and cites the regulators, exchanges and fund companies it relies on.
Tactfolio itself builds and tests long-only strategies on US stocks and funds. It does not trade options, CFDs or forex. Those guides are here to explain the terms, not to suggest trades.
Investing basics
What is the S&P 500 index? How it works and what’s in it
The S&P 500 tracks about 500 large US companies. Learn how stocks get in, how the index is weighted, how to invest in it, and how far it has fallen before.
S&P 500 index funds: how to pick one and what they cost
Compare the biggest S&P 500 index funds, ETFs and mutual funds, by yearly fee, see how much fees cost over 30 years, and learn how to buy one.
ETF vs mutual fund: what is the difference?
ETFs trade all day on an exchange. Mutual funds trade once a day at their NAV. Compare pricing, costs and taxes, and see when each one makes more sense.
IRA vs 401(k): differences, 2026 limits and which to use
Compare a 401(k) and an IRA: 2026 contribution limits, Roth vs traditional taxes, income limits, withdrawal rules, and which one to fund first.
Commodities explained: what they are and how to invest
Commodities are raw goods like oil, gold and wheat. Learn the four main groups, how futures work, how commodity funds invest, and the risks to know.
What is an ETF: how exchange-traded funds work
An ETF is a fund that trades like a stock. Learn how ETFs work, what they cost, the main types, and the risks, with SEC sources.
ETF vs index fund: what actually differs
Many index funds are ETFs. Compare index ETFs and index mutual funds on trading, pricing, minimums, taxes and costs, with SEC sources.
ETF vs stock: risk, cost and control compared
Compare ETFs and single stocks on diversification, single-company risk, costs and control, with a round-number example and SEC sources.
ETF expense ratio: what it is and what it costs you
What an ETF expense ratio is, how the fund charges it, and how 0.03% vs 1% adds up over 10 and 30 years, with real fund examples.
Dollar cost averaging: how it works and when it helps
Dollar-cost averaging means investing a fixed amount on a schedule. See how it works with round numbers and what research says about lump sums.
Portfolio rebalancing: calendar vs threshold methods
What portfolio rebalancing is, why a 60/40 mix drifts, calendar vs threshold methods, and how taxes and costs fit in.
Stocks and market moves
Momentum stocks: what they are and how to trade them
Momentum stocks are recent winners that tend to keep winning for a while. See what the research says, how momentum crashes, and how to trade it with rules.
Momentum strategy: types, rules and an example
A momentum strategy buys recent winners by a written rule. Learn the main types, the five choices every rule makes, a worked example, and the risks.
Stock gaps: what gap up and gap down mean
A stock gap is a price jump between one trading day and the next. Learn what causes gaps, the four types, what a gap fill is, and why stop orders can miss.
Options basics
Put vs call options: the difference, with examples
A call gains when a stock rises and a put gains when it falls. See worked examples with break-even prices, and how buying and selling options differ.
What is a covered call? How it works, with an example
A covered call means owning 100 shares and selling a call option on them for income. See a worked example, the risks, and how covered call ETFs work.
Theta meaning: how time decay works in options
Theta measures how much an option loses in value each day as it nears expiration. Learn how time decay works, with an example and the other Greeks.
Options Greeks: delta, gamma, theta, vega and rho
What the options Greeks measure, with a table and one round-number example each for delta, gamma, theta, vega and rho. Education only, with the risks.
Implied volatility: what it is and how it prices options
Implied volatility in plain words: how it differs from historical volatility, what the VIX shows, and how IV crush hits option buyers. Education only.
Leverage and derivatives
CFD trading: what it is, how it works and the risks
A CFD is a leveraged bet on a price change without owning the asset. Learn how CFDs work, why most retail accounts lose, and why the US bars them.
Margin trading: how buying on margin works
How buying on margin works, the 50% and 25% rules, and a worked margin call example with round numbers. Learn the risks before you borrow.
Leverage in trading: what it is and how losses grow
What leverage is, how to work out a leverage ratio, and how 2:1 and 10:1 change gains and losses. Covers margin, CFDs, futures and leveraged ETFs.
Leveraged ETFs: how daily reset and decay work
How a leveraged ETF works, why the daily reset makes long-term returns drift, a two-day 2x and 3x example, and what regulators warn.
Indicators and signals
Best indicators for trading: what each one measures
Moving averages, RSI, MACD, Bollinger Bands, volume and momentum explained in plain words, with what the research says and classic rules that use them.
Moving average: SMA, EMA and the 200-day rule
What a moving average is, SMA vs EMA with a 5-day example, the 200-day average, golden and death crosses, and dated backtests of classic rules.
RSI indicator: formula, how to read it, and limits
What the RSI indicator measures, Wilder’s 14-day formula with a worked example, what overbought and oversold mean, divergence, and what the evidence says.
Stochastic oscillator: formula, 80 and 20 levels, and SMI
How the stochastic oscillator works, with Lane’s %K and %D formula, a worked 14-day example, fast vs slow, and Blau’s stochastic momentum index.
Stop loss: what it is and how stop orders work
What a stop-loss order is, how it differs from stop-limit and trailing stop orders, and why a price gap can sell you far below your stop.
Sector rotation: how it works and what the evidence says
Sector rotation explained: the 11 GICS sectors and their ETFs, business-cycle vs momentum rotation, and a classic rule with dated backtest figures.
Trading signals: what they are and how to check them
What a trading signal is, how rule-based signals differ from paid tip services, and what the CFTC and SEC warn about signal sellers and pump and dumps.
Quant and automated investing
Algorithmic trading: what it is and how it works
What algorithmic trading is, the main types of trading algorithms, who uses them, the 2010 flash crash, and how US regulators oversee algo trading.
Quantitative trader: what quants do and how to become one
What a quantitative trader does, the skills and pay, how quant trading strategies work, and how regular investors can use rules-based investing.
How to automate an ETF rotation strategy: 7 steps
How to automate an ETF rotation strategy: pick a classic rotation, read its rules and backtest, paper trade it, then run it in your own Alpaca account.
Backtesting: what it is and how to backtest a strategy
What backtesting is, how to backtest a trading strategy step by step, the biases that fool people, and why out-of-sample testing matters.
Tactical asset allocation: how rules shift your mix
What tactical asset allocation is, how it differs from strategic allocation, and what Faber’s model did in 2008 and after, with dated backtest figures.
Trend following: how it works and what it costs
What trend following is, the research back to 1880, five classic ETF trend rules with dated backtests, and the whipsaws and flat years that come with it.
Mean reversion: what it is and how traders use it
Mean reversion is the idea that stretched prices drift back to their average. See the research, how RSI and Bollinger Bands measure it, and when it fails.
Risk parity portfolio: what it is and how it works
Risk parity balances risk instead of dollars. See a simple stock and bond example, why funds use leverage, and what went wrong in 2022.
Markov regime model: how regime switching works in markets
How Markov chains and hidden Markov models describe calm and stormy market regimes, what Hamilton’s model showed, and simpler rules you can test.
Sharpe ratio: formula, examples and what is a good one
The Sharpe ratio measures return per unit of risk. Learn the formula, work through an example, see what counts as good, and know its limits.
Max drawdown: what it is and how to calculate it
Max drawdown is the biggest fall from a peak to a low. Learn the formula, the recovery math, and the S&P 500’s worst drops in 2008 and 2020.
Calmar ratio: what it is and how to calculate it
The Calmar ratio divides yearly growth by the worst drop. Formula, a worked example, its 1991 origin, and how it compares with Sharpe and Sortino.
Can ChatGPT or Claude backtest a trading strategy?
Yes, with one catch. How to use ChatGPT, Claude or another AI assistant to build and backtest a strategy on real prices, and which results to trust.