EDUCATION CENTRE

27 January 2022

How to Identify Good Traders

To begin with, look for traders with proven track records for at least 12 months and who deliver consistent results overtime. This allows you to evaluate the actual performance of the trader during different market conditions, whether it’s bull market or bear market. Asking for an investor password to check the actual account yourself is always a smart way to verify the authenticity of the result being shown.

Look through all the traders and try to determine what type of strategy the trader is using. Is the trader trading manually or trading with an EA or automated trading system? Remember, automated system is based on historical events, which means there is no guarantee how the system would work towards future extreme market conditions. I

It is important to consider if the trader has good risk management. Does the trader set stop levels on each open trade? And at which level? A good trader always uses stop loss to control the maximum loss he may suffer and the level of risk he takes. Never follow a trader that doesn’t apply stop loss in his trades, since it would mean potential unlimited risk to your own capital.

One ought to take the trader’s performance into consideration. The maximum drawdown means the largest losing order or largest amount of consecutive losing trade. As maximum drawdown is based on a closed order or series of orders, some traders may try to hide big losses by holding on to losing orders, but the number tells me that in the future this trader may experience at least the same amount drawdown and probably even more if they use the same strategy.

Some of the other factors include total net profit, profit factor, percent profitable, and average trade net profit.

There is no definite answer to the percent profitable metrics to define a good trader, as the ideal value varies depending on the trading style. For example, trend traders usually have lesser winning trades but may still be very profitable as the winners typically achieve large gains. Intraday traders, on the other hand, would require higher percent profitable metric to create a winning system as the risk and profit they take on each trade is smaller. In this case, they need much more winning trades as the profit and loss generated from each trade tend to be close.

It is crucial to consider the average trade net profit. The value is calculated by dividing the total net profit by the total number of trades, counting both winning and losing trades.

Is the broker regulated by a creditable regulatory authority? Is the license valid or fake? If the account the trader uses is with a well-regulated broker, the less likely you will encounter a fraud, and vice versa.

Please keep in mind that there is no guarantee that past result equals future performance. Always be aware and monitor the trades regularly. Spreading the risk by following different traders may be an option to consider. Before you make your investment, feel free to reach out professional account managers at USG. USG offers 24-hour personalized client support based on your preferences and needs.

Disclaimer:
Trading Foreign Exchange Currency Pairs (FX / FOREX) and/or Contracts for Difference (CFDs) on margin carries a high level of risk to your capital. These derivatives may not be suitable for all investors.