1.Consider the Recommendation List First
The traders on the Gate recommendation list on the homepage of Copy Trading are derived by the system through an objective algorithm, which has a certain reference value, and copiers can select the best Lead Trader to copy.
2. Make A Scientific Evaluation of Traders’ Style By Analyzing the Index
Different traders have different styles of leading and each copier also has different psychological expectations, so the process of selecting traders is critical. Based on “Sharpe Ratio”, “Yield Curve” and other parameters, you can scientifically screen suitable traders to better achieve your psychological expectations.
Index 1: Sharpe Ratio
Formula for Calculating the Sharpe Ratio
In Gate Copy Trading, the Sharpe Ratio can be simply understood as a technical parameter, obtained by a trader’s average ROI/trader’s ROI standard deviation.
The total ROI and ROI’s standard deviation are updated every hour. Sharpe Ratio Value & Practical Application
The Sharpe Ratio measures the relationship between ROI and risk, which is related to the trader’s operation. For example, the average return of trader A is 10 and the risk is 20%. The average ROI of trader B is 10%, and the risk is 30%. As you can see, the relationship between return and risk of trader A is more advantageous.
However, if the average ROI of trader C is 10%, the risk is 20%, but the average ROI of trader D is 20%, and the risk is 50%. How to objectively evaluate who in C and D maintains a more reasonable relationship between risk and ROI?
This is when the Sharpe Ratio is used. According to the Sharpe Ratio’s calculation formula: the trader’s average ROI /trader’s ROI standard deviation, the larger the ROI standard deviation, the higher the risk. Let’s continue the discussion between the case of the trader C and trader D and briefly explains how to use Sharpe Ratio to choose between the two: judging the relationship between risk and ROI through Sharpe Ratio. The Sharpe Ratio of the trader C = 10% / 20% = 0.5, and the Sharpe Ratio of the trader D = 20% / 50% = 0.4. Obviously, trader C is better, judging from the Sharpe Ratio. It can be seen that, as a copier, you can use the Sharpe Ratio to assess the trader’s leading ability, thereby reducing the investment risk and improving the return on investment.
Index 2: Yield Curve
What is the Expression of Yield Curve?
The Yield Curve is expressed as follows: the horizontal axis is the time, and the vertical axis is the two-dimensional coordinate curve of the trader’s ROI.
Case Study: The Valuable Information in Yield Curve
As shown in the figure below, the Yield Curve is displayed in the form of time & the Yield Curve. This way, copiers can more intuitively observe the overall trend of the traders’ leading ROI.
The ROI peak in the figure represents the trader’s potential ability, and the peak and low valuation of ROI reflect the trader’s leading stability. Overall, the trader is relatively stable and reliable in leading whose ROI is surging overall. There will also be an intermittent, small decline in ROI, but reasonable stop loss control. Capital losses rarely occur, indicating the trader has enough methods to deal with the volatile market. You can consider following him.
3. Select the Right Copying Mode
There are risks in copying, so users should select the right copying mode based on their funds and interests. New copiers should select copying mode carefully. The platform suggests that copiers select “simple mode” to get a similar ROI to the trader and copy the trader’s positions!
4. Several Common Mistakes in the Copying Process
4.1 Cognitive Errors
Lack of Risk Awareness
High risk and high return is the basic rule of investment, the future itself is high- risk. The lead trader only controls the risk and return ratio in a more reasonable range, and exchanges the lower risk for a greater return, but it does not mean that the copier does not have to bear the risk and will not lose. Since traders can not guarantee that they can win all the time, there may be losses. In fact, the essence of copying is not to avoid risks and only gain profits. Instead, it is about matching returns and risks to the same level as a good trader.
Cognitive Error: There is no value in copying a trader with a low or medium yield and win rate.
It is a cognitive error that there is no value in copying a trader with a low or medium yield and win rate. The following examples of traders A and B will help you further understand the case.
Trader A: high yield, low and medium win rate
Trader A has a relatively high profit, but his trading win rate is at a medium and lower level, indicating that trader A accurately captures the price trend in some of his single trading strategies and obtains a larger profit range. Trader A is more prominent in profit and loss on the whole, and has a larger probability of getting a high win rate in a single order.
Trader B: low and medium yield, high win rate
The yield of trader B is at a lower and medium level, but the winning rate is high, indicating that trader B has a relatively larger probability of making a profit on each order, and the yield is relatively stable. With less risk, trader B is more suitable for copiers who seek stable returns.
Focus on short-term profit and loss, with no long-term vision:
Trading is a long-term business. Copy Trading provides normal users with insufficient trading experience with a shortcut to connect with high-quality traders, but it is still a long-term investment, so copiers should also have a long-term vision of measuring profit and loss. When you have the idea of abandoning copying, you can compare the weekly copying returns with the monthly copying returns in historical copying data, and do not take short-term profit and loss as the only criterion for evaluating the trader’s ability to lead trading.
Feel nervous and fearful when loss is mentioned, lack of patience:
The market is volatile, and traders also need time to adjust their trading strategies to cope with market changes (as shown in the figure: a trader’s yield changes over time). Copiers who tend to panic and fear need to be patient and wait for traders to adjust their trading strategies. Also, copiers should have a reasonable psychological expectation of stopping loss and taking profit before copying.
4.2 Not Understanding the Copying Mechanism
Copying a highly profitable order certainly means winning profits
Copiers copy the trader at the sight of his highly profitable orders but fail to get the order’s return. The reason is that the trader may have completed the position opening when copiers see his order. Copiers can not establish the same position at the moment, who can only wait for the next opportunity to copy the trader to open a position.
I have copied but no copying data is showing, does this mean that the copy failed?
No copying data does not mean that the copy failed. Copiers can check the data in the following ways.
4.2.1. Check the copying mode: check if you are in the advanced copying mode. First of all, we need to check whether we have enabled “Copy From Stracth.” After we choose the option, we can copy a trader as soon as he/she opens a position.
4.2.2. If the trader has not opened a position, check whether there is a notification in his Feeds through his homepage or you can actively leave him comments and interact with him to remind the trader to open positions.
4.2.3. A copier can copy multiple traders to open positions. If the trader does not open positions for a long time, the copier can choose other traders to copy.
