Currensee Tips: Money & Risk Management
The way you manage your money and risk at Currensee depends on which Trade Leaders you decide to follow and on your account settings. With regards to the risk of each Trade Leader, the quickest way to evaluate this is by looking at the Risk Index column in the Leaderboard (you may have to select this column if it’s not yet showing). Currensee use a proprietary algorithm to calculate a risk score based on the Trade Leader’s historical Daily Volatility, percent Days Losing and Maximum Drawdown percentage. A Risk Score of less than 30 is considered to be a Trade Leader that historically manages their risk quite closely. While this is a good starting point, also look at the historical drawdown as this is important when trying to avoid large losing positions. Please note though any view you take on how high or low risk a Trade Leader is, is only based on historical data, and hence there’s no guarantee the drawdown they reach in the future won’t be higher than in the past (in all likeliness it will, since often the data is only based on 6-12 months of data).
Once you’ve categorised the Trade Leaders you then have to allocate your funds to them based on your overall risk profile for investing at Currensee. E.g. if your profile is 70% low risk, 20% medium risk and 10% high risk, then allocate your funds accordingly to the different Trade Leaders.
This may not always be straightforward with Currensee since some Trade Leaders require a minimum investment of $12,500.
You may also consider spreading your risk by phasing in your allocations to a Trade Leader. Thereby you reduce the risk that all your funds and money being allocated when a Trade Leader hits a poor month. Please note though that the Currensee maintenance fee is charged on all the money in your account, whether allocated or not.
When allocating funds to a Trade Leader you have to set the maximum Drawdown you’ll allow and the leverage you want to take.
The “Drawdown Protection % From Peak or Initial Allocation” is the maximum overall amount of drawdown you will allow for the Trade Leader allocation ‘From the High Watermark Peak’ or from your ‘Initial Allocation’. E.g. if you set this to 30% (default) and you started with $1000 allocation while your allocation went up to $1300 (i.e. $300 gains). This means that if you select ‘From Peak’ the drawdown protection will be triggered once the balance for this Trade Leader in your Currensee account hits $910 (i.e. 30% of $1300) or if you selected from ‘Initial Allocation’ it would be triggered at $700 (i.e. 30% of $1000).
The “Open Drawdown Protection %” is the maximum amount of unrealized loss you will allow for this Trade Leader allocation. I.e. this only relates to open positions.
When any drawdown protection is triggered, all open positions for this Trade Leader will be closed and no further trades from this Trade Leader will be copied until you re-activate the Trade Leader.
It’s always good to look at the historical drawdown for a Trade Leader when setting these levels. However because of the fairly high slippage you’re likely to experience with Currensee, you should add 5 to 10% to the maximum level you expect the trade leader to adhere too. E.g. if you expect that their trading strategy requires a drawdown level if 30% to function well over time, if you set your level to 30% you’re very likely going to be stopped out when this trader reaches a drawdown of 25% in their account depending on the slippage.
The “Leverage Multiplier %” allows you to change your leverage relative to the Trade Leader’s leverage. E.g., a Currensee Trade Leader’s trade at 10:1 leverage will become 5:1 leverage in your account if you set this value to 50%. You can also increase leverage and setting this to 200% means that any trade they make at 10:1 leverage will become 20:1 in your Currensee account. Please note that you may also need to increase your drawdown levels if you increase the leverage. Increasing the leverage is obviously much more risky. You must also ensure your account meets the minimum capital requirement that supports the leverage amount you select.