As the leading social forex community and forex account analysis service, we’re always looking to develop new and unique features to be used by our members. Some of our features even create new industry standards, after seeing many of our competitors copy it to the letter (for example, account verification process and system tags).
The recent innovation we’ve been working on is a ranking formula for our AutoTrade systems. Up until now, systems were ordered by daily return, however a higher daily return doesn’t necessarily mean a better trading system (it may be high simply due to an excessive risk). We’ve been researching the different parameters of a trading system for the past few weeks to answer the following question:
Which system has the highest return with the lowest risk, while having the most consistent growth curve?
We’re glad to say we’ve developed such a formula! Unlike other similar services having black-box “proprietary” ranking algorithms, transparency is one of our biggest concerns here at Myfxbook and therefore we are happy to show you the exact formula:
Gain / (Drawdown X Standard Deviation)
How to read the above formula?
– When a system’s gains increase, ranking increases and vice versa.
– When a system’s drawdown increases, ranking decreases and vice versa.
– When a system’s standard deviation increases , ranking decreases and vice versa.
If you have any suggestions or comments for improvements, do let us know.
You can open a free AutoTrade demo account here: https://www.myfxbook.com/autotrade
On the same note of new features, we’re also excited to announce the addition of a new widget – the toolbar widget! You can now add the same toolbar as in Myfxbook, to your website, which shows calendar events, streaming news and rates!
To add the toolbar widget to your website, simply use the following code:
<!– myfxbook.com toolbar widget – Start –>
<script type=”text/javascript” src=”https://widgets.myfxbook.com/scripts/toolbar.js”></script>
<!– myfxbook.com toolbar widget – End –>
(If you’re having trouble setting it up, do let us know).
Have a great week,
The Myfxbook Team.
Seems like a sound and beautifully simple way to rank a trading system
Looking forward to seeing what systems come out on top!
Hi there,
It’s good to know about new Autotrading ranking formula…
I also have suggestion:
1. The Signal Provider must pass 1 year, trading account still active, with minimal annual gain 20% and Drawdown less than 30%… also without any record equity drop to zero…. and no floating loss/hedging/locking position (must in clear position).
2. About minimal capital for Signal Provider, please make other option for minimal $100, but must have pass 3 year, trading account still active, with minimal annual gain 20% and drawdown less than 30%… also without any record equity drop to zero…. and no floating loss/hedging/locking position (must in clear position).
sounds extremely hard? well, it is.
Trading forex is hard… because it’s related with peoples money…. and Signal Provider must responsible for this job.
About option for capital $100,,, there’s might be great trader out there, have better skill, but currently doesn’t have big money to invest in forex.
Thanks.
Better still…. give the user full flexibility to turn certain ranking metrics on/off – each metric could be standalone (ie as per Widy’s comments above), allowing users to set parameters to suit their own trading profile/risk/etc.
You could then have a wider selection of ranking and filtering available and allow users to set and save their own filters/ranking.
Overall you would then be able to monitor the overall community and formulate some “standard profiles” that could be added as a drop down selection that users could select to reflect the different expectations of differing user groups… ie high risk & high return, low risk medium return, based on currencies, or any other metric…
Hope that all made sense?! 🙂
What happens if you put your money in the bank and get 1% per year as a return without drawdown nor standard deviation?
Your formula explodes.
Sorry, but I don’t like formulas that cannot deal with trivial cases.
This is why I like Myfxbook so much. It’s all about us the traders and helping us to make money not just making money for the signal providers.
Please keep up the good work myfxbook!
Thanks,
Brett
I’m very proud of what you are doing FINALLY. Gross ROI is so overrated and deceitful to the trading community.
– Will you have this ranking score (Risk-adjusted Rate of return or RA-ROI) available and applied to all systems monitored by myfxbook (not just autotrade)?
Will you presort the myfxbook monitored systems by the new RA-ROI?
– Can new trading contests be based on highest RA-ROI and not gross ROI?
Thanks
Hello,
I am not sure if that ranking system really works. Please correct me if I am wrong.
If you look at the current Nr. 1 (Bataviafx Management) you can see that the real gain (Abs. Gain) is only 17% till April and the reason why the TWR Gain is 753% is because this trader deposits new money all the time.
You can download all the trades (incl. deposits and withdrawals) in a CSV format and check it.
How can this be the top rated trader?
Cheers,
Wolfixx
Thanks! 🙂
The key is to have just enough requirements to find good systems without filtering out too many of those good systems.
The minimal balance requirement is unlikely to be lowered from the current $1000 as a much lower balance will allow traders to trade less responsibly.
Thanks for the feedback!
Yes, that does make sense, but at the end of the day, you’ll be adding endless options to create endless ranking combinations – this might work for the advanced users, but most of the users simply want to see the rankings as is without messing around with any settings.
In any case, you’re more than welcome to post it in our suggestion box http://www.myfxbook.com/community/suggestion-box/8,1 and if we get many votes on it, will be definitely implemented 🙂
For every rule there is an exception. Obviously, the formula cannot be applied to a system with no trades – however this cannot happen with AutoTrade systems as there are several requirements (3 months of history, at least 100 trades etc’).
Thank you Brett for the kind words! 🙂
Yes, we plan to apply it to all Myfxbook systems after it proves its effectiveness over time, as we’ve found it to be in our tests.
Absolute returns are skewed easily by adding and removing funds from the account while the gain (which is time weighted return; “TWR”) isn’t.
I suggest reading here about the calculation methodology of the gain figure: http://myfxbook.com/help#help_11
Great article! 🙂
the formula should include the “abs. gain” rather than “gain”.
In such case, withdrawing funds from the account would increase ranking which is incorrect.
great tool!
A little vague though.. is it the max DD and what is the SD based on?
Thanks! 🙂
Yes, the drawdown we refer to is always max drawdown (since inception).
The SD is based on the standard deviation of returns (of each trade).
ok, i now understand.
dror, what you say makes no sense. We are referring to placing money in a trading account, for active TRADING. Depositing money in a bank which ‘guarantees’ x% interest with zero TRADES is not the same scenario.
I think this happens if it is a PAMM account where you would expect lots of withdrawal and deposit transactions in the trade history. This then creates a big difference between the gain and absolute gain % return figures.