Copy Trading Update – eToro -13/March/2019

The Riskiest Traders are still winning in my portfolio ...

So the two riskiest traders in my portfolio - Citadelpoint and Aimstrader, are STILL making the most money for me, even though I've drawn-down my copies of them and I'm now copy them both with lower proportions of my portfolio than the other traders in there...

Alnayef is still holding trades open for a long time...

You might remember how I talked about the trader Alnayef in my portfolio. He's  the one who's holding trades open for a very long time and starting rack up lots of fees. Well, he's still doing it.

I think he might be just opening trades and then waiting for as long as it takes until the trade turns green. That seems ok, but it's causing a lot of overnight and weekend fees as he's using leverage on his trades, so the fees apply.

It might be the fact that he has an 'Islamic' account which is doing it - he doesn't have to pay the fees but I do. That's still just a rumour though, I haven't looked into what an 'Islamic' account really entails yet. I would imagine eToro has found another way to make money off people with these so called 'Islamic' accounts though, so there may be other charges which he's charged which I'm not charged.

Not sure... I'm still sticking with him though for now. I'm hoping that something shifts, and those trades go green or he starts to make some winning new trades.

Aimstrader

He's gone from the portfolio. It just wasn't changing and he was using a strategy which was consistently losing money and he was also doing it in a risky way. There wasn't a lot of upside - either in terms of actual trading profit, or in terms of being a good fit for my overall strategy. It's a shame, but he's gone now.

What to do with the money I was copying Aimstrader with?

I was going to copy a new trader called 'Harshsmith'. I've been watching his performance for a while and he's one of the traders I'm most interested in. But there's a problem with the money I'd need to copy him with.

It has to do with the 'minimum trade size' restrictions for copy trading on Etoro.

What's the minimum trade size?

The minimum trade size is the smallest amount you can use in a trade. In Copy trading, it works very differently from in normal manual trading (where you're trading yourself).

eToro have set standard minimum trade sizes for all of the different asset classes which you can trade on their site. If you go to their help section, and type 'minimum trade size', you'll see the list and all the details for equities, ETFs, Cryptos, Indices, commodities etc.

With copy trading it works a little differently. When you copy someone, when they make a trade , you make a trade. Let's say they use 10% of their total money on an Apple trade. You, as their copier,, will use 10% OF THE MONEY THAT YOU COPIED THEM WITH on the same Apple trade.

If they bought, you bought, if they used leverage (or not) so will you. The difference is in the money that is actually used on the trade. It works as a percentage.

When they make a new trade, etoro tries to open the same trade for you - that's the beauty of copying traders. It's automatic. But if it tries to open the trade, and the resulting trade in your account would be less than $1, then it simply will not open that trade for you. The minimum trade size for copied trades is $1.

A Quick example...

You're copying Trader A

Trader A buys Apple stock with 0.3% of their total account money.

You copied trader A with the minimum copy amount of $200 (as at Time of this article).

Etoro tries to open an exact copy of the Apple trade for you. Buying Apple stock, using 0.3% of the $200 you copied Trader A with.

0.3% of $200 = 60 cents. It's under $1, so the trade won't open...

Is this the problem with copying Harshsmith's trades?

Yes. He has previously said that the minimum he will ever use to make a new trade is 0.24% of his account size. So if I only copy him with $200, as you saw in the previous example, I won't be able to copy all of his future trades. Anything below a 0.5% trade that he opens in future, I won't be able to copy...

0.5% of $200 = $1 (the minimum it will let me open a copied trade with)

So, I've done the maths and worked out that I would need to copy Harshsmith with $460 to ensure that even if he does make a trade in future with 0.24% of his total account size, I'll still automatically open that trade too as it will be above $1.

For now, I can't afford to copy him with that much, so I can't copy him yet. It's a shame really, but maths is maths and you can't argue 🙂

I definitely do want to copy him though in future as he keeps very low risk scores (currently 1 out of a possible 10!). He trades equities, but does seem to be planning ahead in case a bear market arrives. His max yearly drawdown is under my 15% target, and he's a very active and seemingly knowledgeable trader.

And the other trader in my portfolio?

They're sort of steadily ticking along, and in general slowly making money. My focus is rally on what to do about the riskier ones and how to tackle the problem of rebalancing the portfolio whilst I haven't got the ability to add more money to my account. I just can't do it really, so for now, I'll just have to wait and see.

Fingers crossed for the next few weeks. My 15% Copy Stop Loss is still in place for each of the traders I'm copying though. That means that even if they start to lose catastrophically, the copy will just be cut off automatically. It still wouldn't be a great situation though, so I hope they can stay safe until I can add more funds...

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