I thought I would write about getting started in social trading. I like the idea of this as complementary to my own trading - having some exposure, but hopefully spreading the risk a little.
I have opened a new account to kick this off. You can do the same if you want by clicking here.
The account is funded and the first thing to do is take a look at the performances of the traders who can be followed. I will put links throughout this so you can see how people are doing at the time of your reading. To access the rankings list below (it may have changed since I wrote this of course) click here. I am looking at the last three months and “real money” traders only. At this point I don’t have any interest in looking at those who are just trading on a demo account.
Out of the top ten, profits are 6% or more over the past quarter. That’s a very acceptable rate of return, but the usual caveats of past performance not reflecting the future applies. But for me, an even more important figure is the Max DD. This is the maximum drawdown - how much profit has been given back in the pursuit of further gains. It is all well and good racking up impressive profits - but if along the way you end up giving up a large chunk of your account that does not make for a particularly stress-free trading experience.
For example, number 8 on my list has made just over 7.5% - but had a drawdown of 20% along the way. I would like to have steady profits with not too many surprises for the account, so this is one that is not of much interest to me at the moment.
Let’s take a look at the number one performer DaxCall3. 20% profit with a 12% drawdown is a bit more like it. Click here to see this trader's current stats.
The trend in the P&L has been heading the right way - I am going to follow this trader but dial the risk down. If I click on “Follow” then Daxcall3 gets added to my portfolio, showing me an idealised view of what my P&L would look like if I had followed over recent months. Unfortunately, there is no Tardis Trading option - I can’t go back in time and realise those profits.
The way the risk angle works is important. If DaxCall3 does a trade that risks losing 3% according to their stop loss, the same trade will be carried out, risking 3% of my account. Now, if you have traded for yourself before, it is something of an odd experience to see trades going through on your account with you doing nothing about it. So in the beginning, you can dial that risk down even less, until you feel more comfortable. Let’s do that. Clicking top left next to the trader's name brings up the settings option.
If I choose the “Loss Protection” option, I can effectively put a stop loss on my account if it drops to a certain value. Close all trades, stop following new trades.
You can read the next update here.