Part 1
Guide to Selecting Traders in Futures Copy Trading: Understanding Terms and How to Make Smart Decisions
Copy trading is an excellent way to participate in the futures market without needing to be an expert. However, choosing the right traders can be a challenge if key terms and metrics are not well understood. In this guide, we will briefly explain common filters and the numbers that appear in trader profiles to help you make more informed and accurate decisions.
Key Terms in Trader Profiles
1. PnL (Profit and Loss) - Profit or Loss:
What does it mean? It is the total of gains and losses of a trader during a specific period (for example, 30 days). A positive PnL indicates that the trader has been profitable, while a negative PnL means the opposite.
Example: A PnL of 145,227 USD means that in the last 30 days, the trader has earned this amount.
2. ROI (Return on Investment) - Return on Investment:
What does it mean? It is a percentage that shows a trader's performance relative to their investment. A high ROI suggests that the trader has been successful in generating high returns in relation to their invested capital.
Example: An ROI of 250% means that for every 1 USD invested, the trader has generated 2.5 USD in profit.
3. MDD (Maximum Drawdown) - Maximum Drawdown:
What does it mean? It is the largest percentage of loss that the trader has had in their account since its peak. A low MDD is preferable, as it indicates that the trader has been more consistent and has suffered fewer losses.
Example: A maximum drawdown (MDD) of 8% means that at its worst point, the trader lost up to 8% of the value of their account.
4. Sharpe Ratio - Risk/Return Ratio:
What does it mean? This indicator measures performance adjusted for risk. A Sharpe greater than 1.5 is considered good, and a high Sharpe suggests that the trader is achieving good returns for each unit of risk taken.
Example: A Sharpe of 2.0 indicates that the trader has been efficient in generating profits relative to the risk taken.
5. AUM (Assets Under Management) - Assets Under Management:
What does it mean? It is the total amount of money managed by the trader in their copy trading account. The higher the AUM, the more confidence it may generate, as it generally means that more people are copying their trades.
Example: An AUM of 300,000 USD indicates that the trader manages that amount of money from their followers.
Continue reading Part III...
I hope this is useful to you
