If you are an investor/subscriber, it is very important that you read this.
For everyone’s sake, here is a brief summary on how trading works.
Trading is like professional poker. It’s a game of odds and probabilities. Good traders have an “edge”. An edge is simply a higher probability of one outcome happening over another. In other words, if a trader truly has an edge, and they’re obeying their rules, they will make money in the long run. However, wins and losses are not evenly distributed. It’s quite common for good traders to go through drawdowns of 6-12 months. It’s important to see the big picture. If you look at a trader’s five year history, you will start to notice longer drawdowns, but they seem insignificant in hindsight…but at the time, it was stressful for the subscribers. Most likely the subscribers bailed after the drawdown, just before the rally continued.
All traders use different strategies which yield different win-loss ratios. But in general, 90% of a trader’s losses and wins will cancel out. This means that the last 10% are the big wins that make the trader’s equity curve go up. You will notice this if you look at trader’s history. This is difficult for subscribers because the 10% big wins aren’t evenly distributed. They are often dependent on the speed of the market and they will be clustered together. This means that it’s very normal to go many months with mediocre results, because the small wins and small losses are cancelling each other out.
Some helpful tips if you’re a subscriber:
Don’t watch your account balance every day. Watch it for the first week to make sure there aren’t glitches in the system, and then check it once per month. You will only make it worse by checking it more often. You will be tempted to unsubscribe after a drawdown, only to miss out on the rally.
Be nice to your trade leaders. If you scare them away from Darwinex, we all suffer.
If you are lying awake in bed worrying about your money, you are scaling too large.
Don’t criticize the trader’s method. If you don’t like that they add to losing positions, then find another trader. There are many ways to make money.
Spread out your risk. The plans that allow you more traders are more expensive, but this lowers your risk.
Statistics say that the optimal spot for reducing risk for a basket fund of stocks is 20 stocks. Start to see your traders as a basket of stocks. Scale accordingly. If you have 100k and five traders, allocate each of them 20k.
Build relationships with your traders. If they decide to leave Darwinex and go private, you’ll want them to invite you with them.
These are thoughts off the top of my head. Hope this helps to clarify some things.