PTS Journey February 2021 – Choosing the Right Traders
Welcome to the February Edition of this Journey!
This month is all about how I pick traders on eToro. Our goal is simple, build a powerful team of traders and let them trade on our behalf while I drink beer on the beaches of the Algarve.
Or at least that’s the long term plan, but first we got to hit our £30K a year goal!
So lets get going!
If you want to join eToro click here.
I get a small commission at no extra cost to yourself if you go through a link on my website. So its a great way for me to keep all this content free!
Virtual Account on eToro
So the first thing I do is change this to a virtual account.
I already hear the haters saying if you are so confident why don’t you use real money.
Well because I always recommended getting started using a demo account and testing for a few months. Remember I am doing this journey as if I were starting from scratch. If I am new to eToro I am going to try the (Completely Risk Free) virtual mode before I go anywhere near using real money.
This first thing I do is use the little toggle under my name and switch it to from Real to Virtual Account. (Circled Red in the above Image!)
Stay safe kids!
Once we are all nice and safe we can start to do some research into our pro team of traders!
So click on the copy people then go to the filter section and you should get something that looks like the below image!
Now you will quickly see that my screen has a lot less filters applied and a higher number of results 170,683 to be exact!
All I did was clear the filters and switch the time period (circled Red) to 2 years.
I pick 2 years as it provide as much data as possible and clear the filters so that I know what I have added and exactly what I am being shown!
The Next thing I do is go straight to the Advanced options for filtering because that’s where all the good stuff is!
Go to Risk Score and then put the custom options as 1-6.
Then I want to average a return of 33.5% per year 67% over 2 years. So in the returns option I set the minimum to 67% over the 2 year period we are looking at.
The final option I always check is that the traders are all verified and part of the Popular investor program. This encourages traders to be more responsible and means they get paid based on the AUM (Assets Under Management) giving the traders more of an incentive to keep copiers by trading well!
Of course this is no guarantee that a trader won’t go AWOL and self destruct. But that is one of the risks of copy trading.
Now having put those filters on we are down to just 348 potential traders to copy! That’s still a lot..
But I’d rather have 300 than none!
Of course I am not done yet but first we need to make the whole navigation a lot easier as the current layout is difficult to sort through.
Super hack change the view on circled bit on the top right and all of a sudden its a million times easier to see the useful stats.
Personally I don’t think that having a huge amount of followers should immediately mean you copy someone.
In the past there have been people who in 4 months of trading have 1000s of copiers and it was all because they had a large chunk in one stock (Tesla, Beyond meat, Gamestop etc). While that one stocks goes up great! but then they cant ever do it again and they slowly die as their account turns to mush!
Now I always look at three of the drop downs which is Return, Risk Score and Weekly Drawdown. I generally don’t like to use the number of copiers as just because someone popular doesn’t mean they are good and there are some hidden gems that are often better and just poorly advertised.
I like to work my way down the list from the top 20 on Return, top 20 lowest risk and top 20 with the lowest drawdown.
I then add them to a new watchlist and these are my potentials.
Its really important to save the people to the new watchlist as once you leave the filter you have to start from scratch which is mildly annoying.
Now you can do more than the 60 I suggest and I would strongly suggest doing as many as you can but looking in-depth at 60 accounts will take a lot of time!
Just remember you get out of it what you put in!
Another great way to organise traders is by limiting the allocation of assets.
For example you may have your own crypto, so you don’t want a trader who has more than 10% of their portfolio into crypto.
So you simply put 10% as the max and filter and you will get a list of traders who meet all our previous goals and have less than 10% crypto exposure!
This is a really useful tool for striving for greater trader diversity!
Next we want to go to out Watchlist left hand side. Then in the watchlist zone we want to go to our newly created watchlist called Potentials.
Now Just make sure you change the view so its a nice list.
Then lets start from the top!
The goal of this first scan through is to eliminate anyone who doesn’t have enough experience or doesn’t meet your criteria.
For me I wanted to limit crypto exposure and ensure the trader had experience through difficult times.
The first person I looked at what pino428.
Initially I looked at his feed and specifically his Bio which should provide a quick snapshot of what he does and trades.
I went to his stats and saw he traded through March 2020 (COVID Crash) and did reasonable well.
Next I looked at what he traded and for how long and and saw it was mostly Stocks (57%) with ETFs (19%) and Crypto (18%) for about a month.
Next I went on to look at his portfolio and see what his realised gain was over the last year, and it showed 46.29%, meaning this trader had closed positions at a profit and made real money not just paper gains which for me is a positive!
From a quick overview I liked the trader so I moved him into another watchlist called “Potentials V2”
I continued down the list until I had another smaller list.
I then repeated the process for “Potentials V2” Only this time I got the spreadsheet out and went through each trader and recorded their stats and compared them to the popular indexes, mainly S&P and DJ.
Finally I narrowed it down to 6 traders who I liked.
Now I wanted to copy all six, however Miyoshi was unfortunately banned from new copiers because he had reached the limit for tier.
I kept him in the watchlist and then on the virtual account copied the remaining five traders on the 1st of March 2020.
I have now removed Rubymza from the portfolio, as her lack of returns was pulling the portfolio down to much. This is part of the reason I recommend starting in a Virtual portfolio.
It might have been a bit rash but I wanted to start showing virtual results ASAP. And its part of the reason I always recommend starting in a Virtual account!
I am also considering removing JeppeKirkBonde as compared to the other traders his max drawdown during the pandemic was high.
Doing rough calculations.
The Expected Average Return of this portfolio is: 35.55%.
2.5% above our target of 33.50%
The Expected Average Drawdown is: -32.08%
The RoMaD a ratio of Return to Max Drawdown is 1.11. Over 1 means its an acceptable investment.
For a quick comparison
The S&P 500 returned 0.47 and the NSDQ 0.81.
This was all worked out in a spreadsheet (I will share it at some point!).
Now we will monitor these traders on the virtual account and continue to find and research new traders for the next 5 months. I will also save the £200 per month so I can copy with real funds.
Fingers crossed the copier amount changes back to $200 USD instead of the temporary $500. If it doesn’t then I will deposit whatever the minimum required amount is at the time. Ideally we will keep to £200, as I believe £200 a month is attainable for most people who want to invest!
So next month we will review our stats and look at a few more traders!
If you want to join eToro click here.
I get a small commission at no extra cost if you go through a link on my website.
So its a great way for me to keep all this content free!
Any questions please do not hesitate to drop a comment!