WE EXPLAIN COPY TRADING
A factual guide to understanding performance data and ranking traders by actual skill, not marketingWhat makes a good trader to copy?
Sharpe Ratio above 1.0, Max Drawdown under -30%, and at least 12 months of consistent performance. These metrics reveal skill, not luck.
How do I avoid losing money copy trading?
Ignore follower counts and short-term gains. Focus on Maximum Drawdown—it shows the worst loss you'll experience when copying.
Why are high returns dangerous?
Returns over 100% annually usually require extreme leverage. One bad move can wipe out your entire investment.
What's the best metric to compare traders?
Sharpe Ratio. It measures returns relative to risk, letting you compare traders fairly regardless of their strategy.
eToro displays comprehensive statistics, but interpretation without context leads to catastrophic decisions. Traders routinely copy accounts that show 300% returns but have -60% maximum drawdowns. They ignore Sharpe ratios and follow popular investors who achieve returns through unsustainable leverage.
This guide decodes eToro's metrics using industry-standard analysis frameworks used by institutional traders and quantitative analysts.
Core eToro Performance Metrics
What it measures:
The net percentage change in a trader's account value over a specified period.
Critical insights:
- ROI without context is worthless. A +500% return in 3 months requires extreme leverage
- Always compare ROI across the same timeframe (minimum 12 months)
- 5% monthly compounds to ~79.6% yearly, not 60%
Red Flag:
+300% after -50% loss in prior year. This is recovery, not skill.
What it measures:
The largest peak-to-trough decline in account value before recovery. This is the worst loss the trader has experienced.
Interpretation Guide:
Why MDD Matters:
If you copy a trader with -45% MDD, your capital will decline 45% during drawdowns. Most traders panic-sell at the bottom.
What it measures:
Risk-adjusted returns. How much profit per unit of risk. The single best metric for comparing traders fairly.
Performance Levels:
Best Metric for Comparison
When two traders have similar ROI, Sharpe Ratio determines the winner. Higher Sharpe = same profit with lower stress.
What it measures:
Current market exposure and probability of account wipeout. Updates daily based on open positions.
Score Interpretation:
Critical Insight:
Risk Score changes daily. A trader with great history but risk score of 9 is overleveraged NOW. Avoid until normalized.
Trader Ranking Framework
Tier 1: Non-Negotiable
- Sharpe Ratio above 1.0 — Proves risk-adjusted returns demonstrate competence
- Maximum Drawdown below -30% — Indicates consistent risk management
- 12+ month track record — At least one year of real data
Tier 2: Strong Indicators
- Risk Score 3-6 range — Currently not overleveraged
- Positive returns 70%+ of months — Consistency over 12-month period
- Win rate 45-60% range — Realistic and sustainable
What to Ignore Entirely
Total follower/copier count — No correlation with skill
Best single month ROI — Indicates luck, not skill
ROI without risk context — Meaningless and deceptive
Common Metric Misinterpretations
"500% annual return = incredible trader"
Why wrong: Requires 10:1+ leverage. One 2% adverse move eliminates gains. Unsustainable.
Check instead: Sharpe Ratio and MDD. Skilled traders show 30-50% annually with <-25% MDD.
"1,000+ copiers means this trader is the best"
Why wrong: Popular Investor status creates artificial visibility. More copiers harm you via execution slippage.
Check instead: Tier 1 metrics (Sharpe >1.0, MDD <-30%, 12+ months).
"Lost 25% last month, but yearly +60%, so recovering"
Why wrong: Recent losses indicate strategy breakdown or desperate overleveraged recovery.
Check instead: 3-month trend. Downtrend after peak = sell signal.
"45% win rate is bad—75% win rate trader is better"
Why wrong: Win rate without position sizing is meaningless. 40% win rate at 5:1 risk-reward beats 75% at 1:1.
Check instead: Average win vs average loss size. Combine with Sharpe Ratio.
| Trader A | Trader B | |
|---|---|---|
| Annual ROI | +85% | +32% |
| Sharpe Ratio | 0.6 | 1.8 |
| Max Drawdown | -45% | -18% |
| Risk Score | 8-9 (overleveraged) | 4 (moderate) |
| Consistency | +180%, -15%, +120% (erratic) | +2.8%, +3.1%, +2.9% (stable) |
Choose Trader B
Trader A's -45% drawdown would devastate most investors who'd panic-sell at the bottom. Trader B offers reliable 3% monthly gains without existential risk. Over 2 years, Trader B's stable returns compound to superior absolute returns.