This is the last chapter of the trader’s page section.
In this article, we will see the trading and drawdown tab. Two pretty straightforward statistical analysis domains but with a lot of information that is worth mentioning and explaining.
Starting with the Trading tab.
There are two sections that can be changed on the top right of the chart.
Pairs . Herewith the help of a pie chart, we can see the variety of the instruments of the system. It is widely perceived that trading multiple instruments can improve the diversification of your strategy. Whether the trader is focusing only on one pair (i.e EUR/USD specialist) or he is allocating his portfolio’s exposure to different instruments.
As shown in the above picture, we have a case of a 100% clear balanced portfolio. Not only do we have more than two different instruments but all of them have more or less the same amount of trades taken.
Diversification can be fully weighted or skewed on some specific pairs. We can detect this from the non-linear relationship between the cumulative exposure of each pair.
A good example is the following:
Here the EUR/USD and EUR/AUD pairs are the trader’s main targets, however, there are some other additions in which a partial diversification can be achieved.
Trading time zone. This is a little bit more advanced, but it’s important.
In this chart, we have a visual representation of the time zone that trades are closed.
We have 4 time zones.
- EU
- EUSA
- USA
- ASIA
Each and every zone has specific characteristics which can affect every strategy in a positive and negative way.
EU and USA are quite similar as they tend to have a somehow “regular” flow in liquidity and volatility, as well as spreads.
EUSA is the most volatile and liquid session. It is where both markets are open and all of their participants active. This is where a reversal strategy might seem a good fit.
ASIA is a very low volatility time zone, but with high spreads. This is the “kingdom” of most successful scalping strategies as we rarely see any strong deviation from the average prices.
So it is highly important as you need to know when each strategy is active. Some investors prefer to “monitor” their positions even if they are automatically managed. Others wish to avoid screening in order to avoid irrational decisions based on the running PNL of their balance.
Whatever you choose, pay close attention to this as it is a statistic that rarely changes.
Next, we have the Drawdown tab.
In this section, we have a full analysis of the daily drawdown of the strategy.
At the bottom of the chart, there are three options.
- Daily Drawdown
- Profit
- Closed Trades only
By selecting them you make them visible in the chart.
We can derive two basic views from this graph.
The Daily Drawdown bars
This is the simplest form. We have a historical representation of daily drawdown in bars. With this chart, we can assess the drawdown cyclicality of a trading system, its extremes and tendencies.
Having consecutive increasing peaks or a new highest peak in drawdown might be a first warning sign of imminent risk.
Tip:
ZuluTrade allows the import of past historical performance.
Due to the complex technicalities of the procedure, the imported period will not “paint” drawdown bars.
So, be always wary of the dedicated badge when you see a drawdown absence of a specific period that does not mean zero-risk.
The Profit – Closed Trades Only Correlation
This is the chart where the trader’s risk management is in full display.
The distance between the two lines is the daily floating PNL of a strategy. When the distance is really small and somewhat consistent in a long-term range then this trader either uses strict stop loss or closes his/her trades intraday.
However, there are also those who choose to manage their risk with martingale and grid techniques.
Their final equity might seem like a perfect “stairway to heaven” but the below chart shows us that nothing is a straight line to profitability.
The investor in these situations should be careful and alert as these deviations might become uncontrollable should the proper risk management (margin calculation and capital allocation) have not been performed.
CopyTrade with ZuluTrade
That was all for the trader’s page tabs.
The first part of the series is completed and now we can dive into far more advanced processes for structuring your portfolio.
However, before moving on, it is important to note the importance of this first step.
Investing your time in analyzing and assessing the strategies that you will include in your portfolio should be your number one priority, as no one else will do it for you.
ZuluTrade knows that and that’s why it tries to keep the trader’s page fully updated with statistical and metric analysis. So next time when you land on a trader’s page, take a good look at his/her stats because you might spot the next “big thing”!!
Stay tuned! More to come!
Disclaimer
The views expressed do not constitute investment or any other advice /recommendation /suggestion and are subject to change. Reliance upon information in this material is at the sole discretion of the reader. Opinions expressed in the report do not represent the opinion of ZuluTrade Social Trading Platform and do not constitute an offer or invitation to anyone to invest or trade.
Every metric and the statistical number is a result of a past performance, which does not constitute a promise or a certainty for a future one.