Currensee Tips: Choose the Best Trade Leaders
Please note that Currensee was closed on October 31st 2014. We have left this page active though since it may provide some additional inside as well into looking for traders to follow on other social trading networks.
Selecting the traders you want to follow and copy on Currensee (i.e. Trade Leaders) is slightly easier than with other social trading networks and platforms. This is because Currensee evaluate the traders first and only make a select few traders (about 20) available for you. They also constantly monitor the performance and will remove any traders if deemed necessary (e.g. they significantly change their training strategy).
The task for you as an investor is therefore to pick the ones from the shortlist that meet your risk profile and performance expectations. The Leaderboard is the place to start and the quickest way of selecting them would be by ordering them per amount of followers and picking the top ones. This is however taking the assumption that over time, the best leaders will get the most followers. While there’s nothing wrong with this “follow the herd” approach, you may benefit though by spending a little bit more time and look at the detailed indicators as well. As example, Fed-Cor was the second most followed Trade Leader when they had a disastrous month of May 2012 (-17.3%) and White Stone Asset Mgmt was Currensee’s most popular Trade Leader when they lost 15.5% in June.
Here’re some key tips on indicators and behaviours to look for:
- Correlation: this is a very important indicator and measures how close the performance in the Trade Leader’s real live account matches the trades copied in real live accounts of their followers. Because of slippage, broker spreads and market conditions this will be different. A high correlation means you can expect 90% or more of the results from the trades you follow. A low correlation takes this down to less than 70% (often seen with scalpers as they try and profit from short term movements in active markets). From our experience even a high correlation means your results can be 2% less per month than those reported. We only consider high or medium ones, with obviously a preference for high correlation ones. It’s also good to check the slippage yourself (it differs between brokers).
- Following on from the previous point, the impact of slippage will be less with Trade Leaders who do less trades with higher pip gains than those (scalpers) who do lots of trades targeting small pip gains. I.e. the impact of slippage is less on one 30 pip profitable trade than on 6 trades with 5 pip profit each. E.g. with 3 pip slippage you’d be left with 27 pip profit for the first Trade Leader, but only 12 pips with the second one. I.e. 6 x (5 – 3).
- Don’t get drawn into the cumulative and annual performance figures. These figures are slightly distorted with quite a few traders showing exceptional results in the first few months. Unfortunately this was often during a period they were not yet on the Trade Leaders program and this historical data was imported. Regularly this relates to the first 6 months data during which the Trade Leaders might have been trading a much higher risk strategy which then got adjusted when they started trading for others. If the results of the first 3 to 6 months look exceptional, best to ignore in your analysis.
- Instead of the cumulative performance, look at the performance of the last 6 months and more specifically the performance per month (on the Trade Leader detail screen). If you’re looking for low risk, look for consistent performance across the months. For higher risk, concentrate on the % gains in the past 6 months.
- Be wary about new Trade Leaders being added to the platform. While Currensee have a clear process which evaluates all their past live trades, there’s no way they can foresee how this trader is going to behave once they start trading for other investors on the platform instead of just trading for their own account.
While Currensee like to promote a more ‘select, invest and forget’ approach, it’s still beneficial to regularly monitor your allocations as Trade Leaders perform different under changing market conditions. Even traders with 1 or 2 years of positive returns and low risk behaviour (i.e. low historical drawdown) have been know to go “rogue-ish” and post >30% monthly losses. As with any investment, past results are not necessarily indicative of future results.