Important Copy Trading Metrics to Analyze

16 янв. 2022 г.Hello Traders and Investors,

Today I want to talk about some of the important metrics pertaining to a live trading statement that you should assess before considering which traders to copy. For those of you that are not familiar with copy trading, it's the most revolutionized way for investors and traders to safely invest with professional traders in 2022.

== COPY TRADING SERVICE PROVIDERS ==

• LEFTURN Inc.
  
• eToro
  
• collective2
  
• ZuluTrade
  
• FXTM
  

== WHY COPY TRADING EXISTS ? ==
Unfortunately in the past there's been lots of scams in this industry with fake traders or money managers where investors would give a professional actual cash. The fake trader would deposit the investor's funds in their own personal account, for the investor to then later discover the whole investment was a scam. Luckily however, copy trading was born to help eliminate the possibility of being scammed by fake traders or investment advisors.

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Let's now review some important metrics pertaining to trading statements. For those of you that are not familiar with myfxbook or FXBlue, these are 2 great third party resources available for traders to showcase their past performance by connecting their MT4 or MT5 account to either myfxbook or FXBlue's API.

== IMPORTANT METRICS TO REVIEW ==

1. First and foremost, is the account verified via a third party vendor?
The first early sign of a fake trader is if their willing to showcase their past results of their live verified trading statement. Be cautious about anyone showcasing their results via screenshots or Photoshop files. Always ask for statements from either FXBlue or myfxbook.

2. Does the trader use his/her real name or an alias name?
We all know that our reputation is our most valuable asset. An early sign of a fake trader might be someone that goes by an alias name.

3. Is the account in which you intend to copy either a demo or live account?
This is very important since most traders can perform well on demo accounts, but can't perform the same on live accounts. When trading live accounts, it has a completely different psychological impact on the trader's mindset since he or she is now trading with live capital.

4. How much equity does the trader have in his/her master account?
Traders that trade with larger accounts tend to have more confidence in their own abilities to perform. Be cautious about traders that are constantly withdrawing large amounts or have little equity in their account.

5. How old is the trading history?
Some traders can perform well for several months especially if their using an EA or some sort of algorithm. Unfortunately for many traders that use fully automated systems, majority of them tend to have a doomsday effect every 6 months to a year. This is why it's important to request at least a year long statement

6. Understanding the trader's strategy
By understanding how the trader enters and exits positions, this will allow you to determine if their strategy works with your risk tolerance and level of comfort.

7. How easily can you contact the trader when you have concerns about the account?
We can't expect the markets to always perform perfectly according to the strategy. Maybe another major crisis is right around the corner that neither you (the investor) or the trader isn't expecting. What's the plan for when the markets are not trending according to plan? How does the trader manage risk in times of uncertainty? Traders that you can easily contact at anytime will give you great ease and peace of mind knowing they are working on adapting to the ever changing market conditions.

8. What is the maximum drawdown?
Knowing the maximum drawdown the trader has had in the past will inform you about how much risk the trader is willing to take on your account. However this metric should be discussed with your trader as they might not take on much risk at first to protect the investor's principal but then increase the risk once the account has significantly grown. Some traders will not risk any of the principal investment but are willing to risk some of the earnings already generated.

9. What are their average monthly returns?
This metric should be proportionate to the maximum monthly drawdown but should also be discussed with your trader to fit your level of risk tolerance

10. How do they manage risk in times of uncertainty?
Does your potential trader use stop losses, do they hedge positions, or close all trades heading into major risk events? Understanding how they manage all risk factors is critical for the life span of the account in which they will trade.

11. What are their fees?
Do they charge a monthly management fee along with a performance fee? Or do they just charge a performance fee? Trader's that only charge a monthly performance fee have greater confidence in their own strategy since they only get paid if the investor makes money first.

12. Which broker are they using?
Some traders want you to register with their broker so they can generate additional revenue through what's referred to as an IB program. Others allow you to use any forex broker and are more interested in generating returns for their investors and not so focused on IB commissions. Trader's that have IB accounts get paid based on the volume traded. Be cautious about traders that want you to register under their IB program with their broker.

13. How often can you request withdrawals?
If you're able to withdrawal funds as often as you like, that's a bonus and again shows greater confidence.