How To – Select The Best Traders To Follow
Did you know you can follow and copy trades of fellow traders, on social trading platforms? This is common news. Now, did you know these traders aren’t ranked and rewarded in the same manner when using different social trading networks, which brings changes to their trading behavior?
No doubt, this will bring difficulty to novice traders looking for an experienced and reliable trader to follow and copy.
Take a look at the following helpful tips to aid in a trader’s quest to find the best trader to follow.
Look For Consistent Results
A consistent positive result shows the strategies implemented are sound. Who will you choose—a trader who delivers 3% each month over a year? Or a trader having 6 months of 10% wins and then losing 7% rest of the year? When looking at graphs of possible candidates, look for a gradual increasing graph as this shows consistent positive results.
Also look for traders that feature a proven track record (of at least 12 months) on your chosen social forex portal.
Look At Number of Followers Copying Trades
Traders that have a large following are usually the safest bet. Look at the number of followers that are trading with “real money”. Does the trader risk their own money or not when trading? What is the amount, if yes? Most social trading networks don’t divulge this particular information but if your chosen platform does, this is an important thing to look at.
Look At Closed Trades Closely
What are you looking for exactly? By reviewing close trades of your chosen trader, you will get to know about average pip size of gains and losses incurred from a particular trade. Keep this in mind that your actual result if following that trade can be significantly different due to slippage and other factors.
Look At the Historical Drawdown
By this, we mean how much of their trading account has been in the negative. Make an automatic assumption that the trader will suffer at least the same or even more of drawdown in the future. This will make the decision easier, especially looking at their strategies followed for all losing trades.
Also look at winning percentages of the trader. Anything higher than 85% isn’t a good sign as this carries a high draw down risk. How is it caused? The trader likely holds onto losing positions on a trade until they turn positive again.
Does He Know When To Cut Losses?
By far, this is the most important requirement that you must look into when reviewing possible candidates to follow and copy. It’s a good idea to drop a current trader’s strategy if he has been underperforming or worse changed their trading behavior.
You won’t get 100% correct results when selecting traders to follow. However, you can make this process easier by knowing the best ones to follow and copy in your chosen social trading platform.