Cooperation principle in CopyFX system is very simple. Investors choose Traders and copy their transactions, Traders trade and receive commission. However, when it comes to choosing the particular Trader to subscribe to, Investors don't very often know what to do. In this case, they choose the easiest path – look for the Trader with the highest profitability in CopyFX rating. And that's all for risk management!
Today we'll try to look into the matter, find out how to manage your risks and choose the Trader that may provide you with steady income.
Rating: compare and calculate
CopyFX Rating includes many indicators, filters, and additional options, which are intended to make the process of searching the ideal Trader simpler. However, "playing" with Rating requires quite a lot of time, and everyone would like to earn income right here and now.
If you have already arrived to this idea, take some extra time and think once again: is it instant income that is really important for you? How critical for you is earning some particular amount of money right now? What is more essential, to multiply the funds you invested or risk a great sum of money over a very small possibility to become rich faster?
In fact, studying CopyFX Rating doesn't take much time if one knows what and where to look for. One should pay particular attention to the following three indicators: Profitability (%), Maximum drawdown, and the number of Trading days.
As we've already said earlier, cooperating with the Trader with the high profitability implies high risks. However, one can't just ignore the Traders with the high profitability. If this indicator is high, it means that right now the Trader is making right decisions and earning money!
The connection between profitability and risks is more complicated than you can imagine. In order not to force you to focus on statistical analysis, we've developed several simple principles.
Choose the trader that has been working in the system for quite a long time
The more trading days the Trader has, the more realistic his profitability is. Big "wins" are balanced by inevitable losses (which is fair enough). We can see more clearly both the trading style of the Trader and how successful his trading strategy is.
Use the combination of the following filters: "Traders with active offers", "Three Months" or "Six Months", and "Trading Days". In addition to that, you can choose the Trader's account type or the way he prefers to receive his commission.
Along with the period of trading activity, one should also take into account the profitability, the maximum drawdown, and how the Trader's profitability chart has been behaving (without steep declines or explosive growths) during the period of his activity in the system.
The more maximum drawdown is, the higher your risk is
Considering that the maximum drawdown in CopyFX is shown in as %, it can be analyzed quite easily. Don't forget that Traders, whose maximum drawdown is quite high, might experience it once again. One is recommended to choose Traders, whose maximum drawdown is medium, up to 15 - 25%.
Pay attention to the ratio between the profitability and the maximum drawdown
The average profitability should be at least 2-3 times more than the average drawdown. In other words, the profitability of the Trader, whose drawdown is 50%, must be about 100 – 150 %.
Although it sounds quite logical and sensible, in real market situations you won't find many Traders with such numbers and might not be able to calculate these numbers, because the basis for calculation is the average value that is not shown in Rating at the moment.
In this case, one can apply the following strategy:
So, today you've learned a bit more about how to choose the Trader. But that's not all – next week, read about other ways to decrease your risks and earn more together with CopyFX!