Risk Disclosure

Last updated: April 29, 2026

1. Futures Trading Risk

Futures contracts are leveraged financial instruments. The high degree of leverage that is obtainable in futures trading can work against you as well as for you. Leverage means that a relatively small market movement can lead to proportionally much larger losses (or gains) in your account. You may sustain a total loss of initial margin funds and any additional funds deposited with your broker to maintain your position.

Losses from futures trading can exceed your initial investment. If the market moves against your position, you may be called upon by your broker to deposit a substantial amount of additional margin funds on short notice in order to maintain your position. If you fail to provide the required funds within the prescribed time, your position may be liquidated at a loss, and you will be liable for any resulting deficit in your account.

Futures trading is not suitable for all investors. You should only trade futures with money you can afford to lose entirely. Do not trade with funds needed for daily living expenses, retirement savings, or other essential financial obligations.

2. CFTC Regulation 1.55(c) Risk Disclosure

THE RISK OF LOSS IN TRADING COMMODITY FUTURES CONTRACTS CAN BE SUBSTANTIAL. YOU SHOULD, THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD BE AWARE OF THE FOLLOWING POINTS:

• YOU MAY SUSTAIN A TOTAL LOSS OF THE FUNDS THAT YOU DEPOSIT WITH YOUR BROKER TO ESTABLISH OR MAINTAIN A POSITION IN THE COMMODITY FUTURES MARKET, AND YOU MAY INCUR LOSSES BEYOND THESE AMOUNTS. IF THE MARKET MOVES AGAINST YOUR POSITION, YOU MAY BE CALLED UPON BY YOUR BROKER TO DEPOSIT A SUBSTANTIAL AMOUNT OF ADDITIONAL MARGIN FUNDS, ON SHORT NOTICE, IN ORDER TO MAINTAIN YOUR POSITION. IF YOU DO NOT PROVIDE THE REQUIRED FUNDS WITHIN THE TIME REQUIRED BY YOUR BROKER, YOUR POSITION MAY BE LIQUIDATED AT A LOSS, AND YOU WILL BE LIABLE FOR ANY RESULTING DEFICIT IN YOUR ACCOUNT.
• THE FUNDS YOU DEPOSIT WITH A FUTURES COMMISSION MERCHANT FOR TRADING FUTURES POSITIONS ARE NOT PROTECTED BY INSURANCE IN THE EVENT OF THE BANKRUPTCY OR INSOLVENCY OF THE FUTURES COMMISSION MERCHANT, OR IN THE EVENT YOUR FUNDS ARE MISAPPROPRIATED.
• THE FUNDS YOU DEPOSIT WITH A FUTURES COMMISSION MERCHANT FOR TRADING FUTURES POSITIONS ARE NOT PROTECTED BY THE SECURITIES INVESTOR PROTECTION CORPORATION EVEN IF THE FUTURES COMMISSION MERCHANT IS REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION AS A BROKER OR DEALER.
• THE FUNDS YOU DEPOSIT WITH A FUTURES COMMISSION MERCHANT ARE GENERALLY NOT GUARANTEED OR INSURED BY A DERIVATIVES CLEARING ORGANIZATION IN THE EVENT OF THE BANKRUPTCY OR INSOLVENCY OF THE FUTURES COMMISSION MERCHANT, OR IF THE FUTURES COMMISSION MERCHANT IS OTHERWISE UNABLE TO REFUND YOUR FUNDS. CERTAIN DERIVATIVES CLEARING ORGANIZATIONS, HOWEVER, MAY HAVE PROGRAMS THAT PROVIDE LIMITED INSURANCE TO CUSTOMERS. YOU SHOULD INQUIRE OF YOUR FUTURES COMMISSION MERCHANT WHETHER YOUR FUNDS WILL BE INSURED BY A DERIVATIVES CLEARING ORGANIZATION AND YOU SHOULD UNDERSTAND THE BENEFITS AND LIMITATIONS OF SUCH INSURANCE PROGRAMS.
• THE FUNDS YOU DEPOSIT WITH A FUTURES COMMISSION MERCHANT ARE NOT HELD BY THE FUTURES COMMISSION MERCHANT IN A SEPARATE ACCOUNT FOR YOUR INDIVIDUAL BENEFIT. FUTURES COMMISSION MERCHANTS COMMINGLE THE FUNDS RECEIVED FROM CUSTOMERS IN ONE OR MORE ACCOUNTS AND YOU MAY BE EXPOSED TO LOSSES INCURRED BY OTHER CUSTOMERS IF THE FUTURES COMMISSION MERCHANT DOES NOT HAVE SUFFICIENT FUNDS TO COVER SUCH OTHER CUSTOMERS' TRADING LOSSES.
• THE FUNDS YOU DEPOSIT WITH A FUTURES COMMISSION MERCHANT MAY BE INVESTED BY THE FUTURES COMMISSION MERCHANT IN CERTAIN TYPES OF FINANCIAL INSTRUMENTS THAT HAVE BEEN APPROVED BY THE COMMISSION FOR THE PURPOSE OF SUCH INVESTMENT. PERMITTED INVESTMENTS ARE LISTED IN COMMISSION REGULATION 1.25 AND INCLUDE: U.S. GOVERNMENT SECURITIES; MUNICIPAL SECURITIES; MONEY MARKET MUTUAL FUNDS; AND CERTAIN CORPORATE NOTES AND BONDS. THE FUTURES COMMISSION MERCHANT MAY RETAIN THE INTEREST AND OTHER EARNINGS REALIZED FROM ITS INVESTMENT OF CUSTOMER FUNDS. YOU SHOULD BE FAMILIAR WITH THE TYPES OF FINANCIAL INSTRUMENTS THAT A FUTURES COMMISSION MERCHANT MAY INVEST CUSTOMER FUNDS IN.
• FUTURES COMMISSION MERCHANTS ARE PERMITTED TO DEPOSIT CUSTOMER FUNDS WITH AFFILIATED ENTITIES, SUCH AS AFFILIATED BANKS, SECURITIES BROKERS OR DEALERS, OR FOREIGN BROKERS. YOU SHOULD INQUIRE AS TO WHETHER YOUR FUTURES COMMISSION MERCHANT DEPOSITS FUNDS WITH AFFILIATES AND ASSESS WHETHER SUCH PARTY POSES ANY RISKS TO YOUR FUNDS.
• YOU SHOULD CONSULT YOUR FUTURES COMMISSION MERCHANT AND REVIEW THE FUTURES COMMISSION MERCHANT'S DISCLOSURE DOCUMENT BEFORE TRADING. THIS DISCLOSURE DOCUMENT, WHICH IS REQUIRED OF ALL FUTURES COMMISSION MERCHANTS, PROVIDES IMPORTANT INFORMATION ABOUT THE FUTURES COMMISSION MERCHANT'S BUSINESS, INCLUDING ITS LICENSURE, MEMBERSHIPS, AND FINANCIAL CONDITION.

3. Hypothetical Performance Disclaimer (CFTC Rule 4.41)

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

4. Automated Trading Technology Risks

FalcoAlgo strategies are automated software programs that execute trades autonomously on the NinjaTrader 8 platform. While automation removes emotional decision-making, it introduces technology-specific risks that you must understand:

• Software bugs: No software is free of defects. Bugs in the strategy code, NinjaTrader platform, or operating system can cause unintended trades, missed entries or exits, or incorrect order sizing.
• Latency and execution delays: Network latency, slow data feeds, or broker-side delays can result in orders being filled at prices significantly different from intended levels.
• VPS and server failures: If you run strategies on a Virtual Private Server (VPS), the VPS can experience hardware failures, reboots, or outages that stop your strategy mid-trade.
• API and connectivity disconnections: Loss of internet connection, broker API outages, or data feed disconnections can leave positions unmanaged.
• Data feed issues: Incorrect, delayed, or missing market data can cause strategies to make trading decisions based on faulty information.
• Broker execution quality: Order fills depend on your broker's infrastructure. Poor execution quality, requotes, or rejected orders can affect strategy performance.
• Memory leaks and resource exhaustion: Long-running automated strategies can consume increasing system resources over time, potentially leading to crashes or degraded performance.
• Network outages: Internet service disruptions, firewall changes, or DNS failures can sever the connection between your trading platform and your broker.

The software runs autonomously and technology can fail at any time without warning. You are responsible for monitoring your automated trading system and having contingency plans in place.

5. Backtested vs. Live Performance

FalcoAlgo strategies are developed and tested using historical market data (backtesting). You should understand the significant limitations of backtested results:

• Hindsight bias: Backtests are constructed with the benefit of hindsight. Strategy parameters may be optimized to fit historical data, which does not guarantee the same parameters will perform well in future market conditions.
• Slippage: Backtests typically assume ideal order fills. In live trading, slippage (the difference between the expected fill price and the actual fill price) can significantly reduce profitability.
• Liquidity: Historical data may not accurately reflect the liquidity conditions at the time of execution. In live trading, large orders or illiquid market conditions can result in partial fills or unfavorable prices.
• Market microstructure: Real markets have bid-ask spreads, order book dynamics, and execution mechanics that backtests may not fully model.
• Changing market conditions: Markets evolve over time. Strategies optimized on historical data may not adapt to structural changes in volatility, correlation, or market behavior.

Past performance, whether backtested or live, is not necessarily indicative of future results. There is no guarantee that any strategy will be profitable in the future.

6. Leverage and Margin Risk

Futures contracts are traded on margin, meaning you only deposit a fraction of the contract's total value to open a position. For example, one E-mini S&P 500 (ES) futures contract controls approximately $250,000 in notional value but may require only $12,000–$16,000 in margin. Micro E-mini S&P 500 (MES) contracts are one-tenth the size of ES contracts but still employ significant leverage.

This leverage magnifies both gains and losses. A small adverse price movement can result in losses that exceed your deposited margin. Key risks include:

• Margin calls: If your account equity falls below the maintenance margin requirement, your broker will issue a margin call requiring you to deposit additional funds immediately.
• Forced liquidation: If you cannot meet a margin call, your broker may liquidate some or all of your positions at the current market price without your consent, potentially locking in substantial losses.
• Intraday margin: Some brokers offer reduced intraday margin requirements. If the market moves sharply against you during a session, your reduced margin may be insufficient, leading to immediate forced liquidation.
• Negative account balance: In extreme market conditions, losses can exceed your total account balance, leaving you with a debt obligation to your broker.

7. Market Risk

Futures markets are subject to sudden and extreme price movements that can result in significant losses. Specific market risks include:

• Flash crashes: Rapid, deep price drops caused by algorithmic trading, liquidity vacuums, or cascading stop-loss orders can result in fills at prices far worse than expected.
• Gap risk: Futures markets can open at prices significantly different from the previous close, particularly after weekends, holidays, or major news events. Stop-loss orders may not protect you from gap losses.
• Low liquidity periods: During off-hours, holidays, or unusual market conditions, reduced liquidity can lead to wider spreads and poor execution quality.
• Overnight and weekend risk: While FalcoAlgo strategies are designed to close all positions at the end of each trading session, there may be circumstances where positions are not closed as intended (e.g., technology failures, exchange halts), leaving you exposed to overnight or weekend risk.
• Exchange halts: Exchanges may halt trading during extreme volatility (circuit breakers), preventing you from exiting positions when you need to.
• Geopolitical and macroeconomic events: Unexpected news, policy changes, or global events can cause extreme market volatility that no trading strategy can anticipate or fully protect against.

8. No Guarantee of Profits

No trading system, strategy, or algorithm can guarantee profits. All trading involves risk, and there is always the possibility of loss. FalcoAlgo makes no representation, warranty, or guarantee that its strategies will produce profits or avoid losses. Any performance data presented on our website, in our marketing materials, or in any other communication is provided for informational purposes only and should not be interpreted as a promise or guarantee of similar results.

Markets are inherently unpredictable. Even strategies with strong historical track records can experience extended periods of drawdown, underperformance, or total failure. You should be financially and psychologically prepared for the possibility of losing your entire trading capital.

9. NinjaTrader Trademark Disclaimer

NinjaTrader® is a registered trademark of NinjaTrader Group, LLC. No NinjaTrader company has any affiliation with the owner, developer, or provider of the products or services described herein, or any interest, ownership or otherwise, in any such product or service, or endorses, recommends or approves any such product or service.

10. Not Financial Advice

FalcoAlgo and Falco Systems LLC are software providers only. We are not a Commodity Trading Advisor (CTA), investment advisor, broker-dealer, or any other type of regulated financial professional. We do not manage client accounts, make trading decisions on behalf of clients, or provide personalized investment advice.

FalcoAlgo claims the publisher's exclusion from the definition of "investment adviser" under Section 202(a)(11) of the Investment Advisers Act of 1940. Our content is published in the form of software tools and general educational materials, not personalized advice directed to the individual circumstances of any particular user.

Nothing on the FalcoAlgo website, in our software, in our Discord community, or in any communication from FalcoAlgo or Falco Systems LLC constitutes a recommendation to buy, sell, or hold any futures contract, security, or other financial instrument. All content is provided for informational and educational purposes only. You should consult with a qualified financial advisor before making any investment decisions.

11. Your Responsibility

By purchasing or using any FalcoAlgo product, you acknowledge and accept all risks described in this disclosure and any additional risks inherent in futures trading. You are solely responsible for:

• Your decision to trade futures and to use automated trading software
• Understanding how the software operates before deploying it with real capital
• Testing all strategies thoroughly in NinjaTrader's simulation (SIM) mode before trading with real money
• Configuring appropriate risk management parameters (position size, stop losses, maximum daily loss limits) for your account size and risk tolerance
• Monitoring your automated trading system during live trading sessions
• Maintaining adequate margin in your brokerage account
• Understanding the tax implications of futures trading in your jurisdiction
• Ensuring your hardware, software, and network infrastructure are adequate for automated trading
• Having a contingency plan in case of technology failures

FalcoAlgo and Falco Systems LLC shall not be held responsible for any trading losses, technology failures, or other damages resulting from the use of our software. You trade entirely at your own risk.

12. Contact

If you have questions about this risk disclosure, contact us at support@falcoalgo.com.