Part II
How to Choose and Compare Traders?
When selecting a trader to copy, it is crucial to consider several metrics, but you must keep in mind that there is no 'best' universal trader. The ideal profile depends on your risk and profit objectives.
Here are some tips for comparing trader profiles:
1. Evaluate ROI and MDD:
If you are looking for high profits, a high ROI is what you should seek. However, a low MDD is equally important, as you do not want to risk large losses.
Balance these two: A high ROI with a too-high MDD can be risky, so look for traders who maintain a good balance.
2. Consider the Sharpe Ratio:
A trader with a Sharpe ratio above 1.5 has a strategy that might interest you, as their performance is adjusted to a relatively low risk.
A Sharpe ratio above 2.0 is generally a sign that the trader has been particularly efficient.
3. Review the AUM:
If a trader has a high AUM, it is generally an indication that they have solid followings and their trades are more reliable, as many people have decided to copy them.
4. Consider the History and Type of Trading:
Many traders may have impressive gains in one month, but if this performance is recent, it may not be sustainable. Opt for traders with a solid history, not just one exceptional month.