Selected | 2021 FOLLOWME Trading Quantifification Report

Looking at the same thing from difffferent dimensions tends to give people difffferent inspirations.

 

When we take a break from the daily ups and downs and look back at the market trend for a whole year, we will be surprised to fifind that in December 2020, the price of gold was around 1800, and after 12 times of non-farm reports and 8 times of Fed interest rate decisions, in December 2021, the price of gold still hovered around 1,800 points.

 

Under the statistics of data, the profifit and loss of several orders that are related to the existence or not of a personal account become insignifificant; while those inconspicuous orders and the seemingly "random" but highly repetitive trading behaviour behind them have become extremely "conspicuous".

 

01

Selection of Forex products

a. Distribution of trading lots

 

 

In 2021, gold will remain investors' favourite Forex product, accounting for nearly 50% of the total volume of FOLLOWME trading; followed by the Euro and the British Pound, which together account for 32% of the total volume of FOLLOWME trading.

 

b. Statistic of average profifit/loss per lot

 

 

From the overall profifit and loss point of view, compared with the currency pairs, the average one-lot loss level of other Forex products (such as gold, crude oil) is higher. The money-making effffect of the market is: If the profifit prospect of Forex product A is signifificantly worse than that of B, then most people will abandon A and trade B. But gold is an exception! As the most popular Forex products, gold has always been in a monopoly position in retail Forex products, but it has no special advantage in profifit and loss data. Investors really have a certain preference for gold.

 

c. Distribution of Top-10 Forex products’ profifit and loss

 

We will collect 10,000 orders for each of the Top-10 Forex products to observe the distribution of profifit and loss.

 

 

From the perspective of data distribution, there are three types:

 

Ⅰ. Up and down equalization type

 

This type of profifit and loss distribution, which is more common on currency pairs, such as EUR/USD and AUD/USD, is a typical equilibrium distribution around the median value. In this type, the potential profifit of the investor is equal to the possible loss.

 

Ⅱ. Up short and down long type

 

Under this type, the investor's possible loss is higher than the potential profifit, such as GBP/USD. It is worth noting that the trading product under this type is not untradable, but is relatively more diffiffifficult to

make a profifit.

 

Ⅲ. Up long and down short type

 

The potential profifit of this type of investor is higher than the possible loss, and the distribution of XAU/USD is typical of the upper and lower short.

 

In addition, of the 100,000 orders, the most profifitable one-lot instrument was WTI (9,700 USD/LOT), and the second and third places were XAU/USD (9,217 & 9,202 USD/LOT). On the other hand, the highest loss order (loss of 2,084 USD) in WTI orders is higher than XAU/USD (loss of 1,848 USD).

 

d. Forex product selection summary

 

For the selection of Forex products, it is necessary to return to the investors themselves, including personal symbol preferences, risk appetite, etc.

 

Conservative investors can choose Forex currency pairs, or simply major currency pairs, because the standard deviation of the cross GBP/JPY is comparable to WTI.D. From a performance point of view, AUD/USD, USD/CAD are relatively easy to trade, and there is no need to focus on EUR/USD or GBP/USD. In fact, as can be seen from the chart above, European currencies are the most diffiffifficult currency pairs to make.

 

For investors with a high-risk appetite or experienced trading experience, gold is undoubtedly the best choice. Although it risk is greater than that of currency pairs, the potential return is also greater. Next, take the XAU/USD, which has the largest trading volume, as an example, to observe how to achieve investment returns above the median level.

 

  02

Gold (XAU/USD) trade

 

 

We expand the orders for gold trading and observe which factors affffect its success or failure of it.

 

1. Is it important to positions?

 

Do not trade with heavy position is already an open "secret". So, what is the actual situation?

 

When investors hold too heavy positions, it may lead to the fault of trading for being swayed by considerations of gain and loss: If he made a profifit, he will think that he closed the positions too early because he wants to gain more money; if he made a loss, there is a flfluke and reluctance for him to leave the market because he wants to win the money back.

 

We take one million gold trading orders with open lots below 10 lots and observe the impact of positions on trading.

 

The horizontal axis is the number of opened lots, and the vertical axis represents the average profifit and loss per lot of each order:

Average Profifit &Loss per Lot = (Order Profifit and Loss - Handling Fee - Overnight Interest) / Opened Position

 

 It can be clearly seen that as the number of Opened Lots increases, the profifit and loss points shrinks sharply.

 

Among them, the order with the longest profifit points is from May 1, 2019, opening a long position at 1281.46, and closing a position at 1837.66 on January 28, 2021, with a volume of 0.01 lots. In addition, there are a large number of orders under 0.1 lots, and the profifit points is more than 10,000 basis points (i.e. the gold price flfluctuates by 100 USD).On one hand, as the position continues to expand, this phenomenon disappears. In addition to a few good profifit orders in the range of 2-3 lots, the profifit points of the rest of the profifit orders is basically flat.

 

On the other hand, as the position expands, the loss points is also slowly shrinking, and its reduction is less than the narrowing of the profifit points. It is not diffiffifficult to understand that after the position is expanded, the potential loss amount is also expanding, and it is objectively diffiffifficult to hold the list that needs to bear long point losses. However, it can still be found that while the position is growing, there are still sporadic long points in the loss distance. At a high position, every big loss with many points may mean a blow up of an account.

 

From this, we have to suspect that as the position increases, the trading pattern of investors is deformed. A large profifit of 0.01 lot traded and a large loss of trading 2 lots often occur on the same investor account at the same time.

 

 

It is more obvious if you compare the number of opened lots with the actual profifit and loss amount of a single trading order. After adjusting to the actual profifit and loss, it can be found that there are just a few of a single large amount of profifit orders. However, the orders with a more than 100,000 USD always emerge. In addition, as the number of lots traded increases, the amount of profifit has hardly increased, but the risk has always increased.

 

It is more obvious if you compare the number of opened lots with the actual profifit and loss amount of a single trading order. After adjusting to the actual profifit and loss, it can be found that there are just a few of a single large amount of profifit orders. However, the orders with the loss of more than 100,000 USD are always emerged. In addition, as the number of lots traded increases, the amount of profifit has hardly increased, but the risk has always increased.

 

With the million trading orders, it can even be concluded that for most investors, increasing the lot size does not make any sense. It will only increase the possibility of loss. There is no obvious gap between the orders below 5 lots and the orders with more han 5 lots in terms of profifit amount. It can even be said that as long as the trading is done well, bewteen less than 1 lot and more than 1 lot, the profifit amount gap is very small.

 

For investors, it cannot simply "copy" the results of a trade with a small position to a large position. The transition from small to large is not only a change in the setting of the trading size, but also a challenge in mentality. The heavier the position, the easier it is to suffffer from profifits and losses.

 

Several points of the maximum profifit amount are traded for 2-3 lots in a single order. In the above two charts, several profifit orders that are at the top and particularly prominent are from the same investor.

 

Overall, big trading size are indeed a major source of investor losses. However, these losses are not entirely from newbies, but more often occur on accounts that achieve certain results under low positions.

 

The author suggests that if you have a position below 0.5 lots and the trading is profifitable, and you want to try to increase your position for greater profifit, it is recommended to use a slow, step-by-step approach to change, rather than one step. In this process, investors should always examine whether the successful trading model under the low position is failed after increasing the position.

 

On the road to growth, we all need to increase our trading volume at a certain point, but when to increase, it is diffiffifficult for many investors. Trading needs to constantly climb upwards and strive for more profifits. It's just this process, investors need to be more cautious.

 

b. Position holding time and trading result

 

 

As can be seen from the above table, the overall trading style of FOLLOWME investors tends to be short-term trading. About 60% of gold trading orders will be closed within an hour, and the overall profifit will remain. But we can't say for sure: FOLLOWME traders are good at short-term trading.

 

In the four quarters, the average profifit and loss per lot of orders with positions held for more than 1 hour (but less than 24 hours) were negative, and the order distribution was basically at the level of about 30%. Among them, the average loss per lot in the second quarter was 12.76 USD, which data performs the best; the worst performance was the third quarter, which reached an average loss per lot of 134.64 USD. In addition, the average profifit per lot of orders within 1 hour in the third quarter was only 1.73 USD. In other words, the profifit of 78 ultra-short-term orders within 1 hour can erase the loss of 1 order within 1-24 hours.

 

From this, it is not diffcult for us to fifind a phenomenon: investors tend to close their positions immediately after short-term profifits, and the subsequent risk control is not good for accounts that have not been with drawn.

 

Orders over 24 hours are evenly distributed over four quarters, all around 5%. There are two main types of orders for this position holding time:

 

Ⅰ. Orders from large-cycle investors;

 

Ⅱ. The flfloating loss of the order is massive, and if you close the position, you will lose a lot of money. So you are reluctant to close it, which was stuck.

 

How the follow-up development is, more depends on the market trend. If the price swings a lot, the loss order may become a profifit; if the market flfluctuates sharply, the loss margin will increase signifificantly.

 

Looking at the table above, it is easy to conclude that the profifit is too low and the loss is too high. In particular, orders held for more than 24 hours have an average profifit of around 200 USD when making a profifit, and an average loss of up to nearly 900 USD when losing money.

 

Investors should strictly manage risk control and make more profifit and less loss.

 

 

c. Trading period and trading results

We count the profifit and loss of investors' orders at difffferent opening times in 1 day=24 hours (UTC+2), and the results are as follows:

 

 

It can be found that placing orders at difffferent time periods has a certain impact on investors' profifits and losses: in the morning and afternoon sessions, where the volatility is relatively flflat, the overall performance of investors is better than that of the late sessions with sharp flfluctuations. In this case, investors must do a good job of risk control, otherwise it is easy to be forced to hold loss orders.

 

Therefore, for novice traders, if you can reduce or avoid trading at night, it will also help to improve investment income.

 

03

summary

At the end, the report presents a comprehensive statement that may not be accurate for a single investor. But we still hope that these data will help and inspire investors.