In our previous blog posts, we talked about the value of position sizing in trading. We presented practical examples and provided various Traders’ graphs to explain the importance of these techniques.
Going forward, in this article, we will analyze the value of patience as we are receiving tones of inquiries from users inquiring whether there are truly profitable Investors from copy-trading.
The usual questions are the following:
-Are they any users who actually win by copy-trading?
They are plenty of them.
-Are they the majority?
No, they are not!
-Why?
As usual, very few people are patient enough to materialize the Traders’ strategy in profits.
“The stock market is a device to transfer money from the impatient to the patient.”
Warren Buffett
Most of the Investors abandon Traders on their first major drawdown or even worse, on their first strike of losing trades. However, having losses is part of trading, of every successful system. There is not a strategy with a 100% winning ratio. This is unrealistic. The ultimate goal is having profits in the long-term overall.
After Traders’ removal, they start recovering their losses, and Investors finally stay with a sense of disappointment or anger as they have eventually lost their funds.
Indeed risk management is an essential part of Investors’ success, therefore, we will dedicate a new blog post to cover this major topic.
“Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.”
Charlie Munger
Back to the questions…
-Where are those Investors?
On ZuluTrade, we can be very proud of our transparency in comparison with other services. Users are able to review Investors’ profits by Traders on each timeframe or to monitor the Trader-Investor’s’ profitability correlation/comparison.
We did our quick search and here below our findings:
DJXCapital is trading on our platform for 92 weeks. The system has ups and downs, major drawdowns, went through stagnation phases, and had great recoveries. The Investors’ total profits are negative but the trader has “veteran” Investors that have gains!
-Who are they?
We have noted 2 cases.
AAAI1902524F has generated $10,487 PnL by copy trading Trader’s strategy since the 21st of July 2019. The Investor wasn’t profitable every single month while he had to tolerate stagnation periods before having new highs. The user hasn’t applied any special rule on the account settings.
Likewise AAA1901052F, the current PnL is $5,455 and the Investor is following DJXCapital since 31st of May of 2019. The user hasn’t applied any special rule on its account settings.
-Would you be interested in more cases?
YunoriYK is another veteran on the platform and the Trader had to handle various volatile market conditions during his trading activity in the last 191 weeks.
Overall Investors’ profits are positive and there are many loyal users of his Trader account.
AAA1310993F has a sharp positive correlation with Trader’s performance. Even though the PnL of $568.00 doesn’t look big, it proves that patience and the right money management can provide a positive risk/reward. As previously mentioned, the user hasn’t applied any special rule on the account settings.
We could report many other similar cases with proven stats, however, we hope that the point of this blog post came through. As said, we will dedicate a special article where we will analyze the risk management contribution in every successful portfolio. This is another major challenge for every user.
So stay tuned for more educational stuff in the short future!