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Over the past few weeks, we have developed our stats module to a very high level of accuracy whereby equity lines will populate for all new signal providers who upload their records for the first time.
This is great for the much needed transparency our copiers require before allocating any funds in copying a given trader.
What I am wanting to do is outline with more clarity how it is we are able to do this and more importantly why it is you should be wary of other popular independent verification sites similar to ours.
How does the EA build Equity on Simple Trader?
First off, the EA monitors the equity high and low of all open positions and our servers then "pull" this data to build the charts on Simple Trader.
But how is it we build equity on historical trades? After-all, if the EA is not attached, we do not know the equity high and low for the open trades, never-mind the historical ones...
Let's walk through this to understand more:
Our EA like any other, is only limited to uploading the only relevant bits of information an MT4 platform holds (before considering any MQL4 code). These data points are:
Now, if a user uploads their record to us for the first time, there is no way we would be able to obtain what the historical end-of-day open positions would have looked like (floating equity-wise), by only depending on the data points we pull straight from the terminal (as it is limited info). This data is simply not held within an MT4 terminal, thus forcing us (like any other verification site) to come up with a proprietary method in building the historical equity line accurately and without slowing down the EA.
So how does Simple Trader build the historical equity line?
Once we have imported all the data points the MT4 terminal provides, we then build our growth line (realised PnL) on an end of day basis: 23:59 GMT. In short, what percentage and monetary gain or loss was realised at the end of the day.
Once this is built, we then "look-back" to find each individual trade (server-side) and obtain which trade/s remained open at this end of day time (23:59 GMT). From here we then search and scan our multiple price feeds to find the fair extremity to which price went, giving us - relative to the trader at hand - what the trade/s would have looked like in their account (monetary and then percentages).
What's important to remember is that we are doing this on nearly the highest level of precision and will continue to refine this over time.
But how is Simple Trader calculating the Draw-down?
First off, we want to make everyone aware that you should be conscious of how some sites are calculating "draw-down" and the figures they are displaying in relation to the data they really have about the trader. You would want to ask yourself questions like: "how often are the data points updated" and "where do the figures derive from" etc.
Lets have a look at how we calculate draw-down using an example below:
This is a screenshot of the "Growth" chart on FX Viper. It is also referred to as a Time-Weighted-Return. In short, what would our $1 investment - since FX Vipers trading inception - look like to date.
Now, looking at the above screenshot, we can see his worst peak-to-trough (highlighted). Let's do some basic math to clarify how it is we are using these 2 figures to equate to a draw-down figure:
First off we invested $1 since inception. This means that our $1 would equate to the following at the highlighted points above:
( $1 * 0.4371 (fraction of percent) ) + $1 = $1.4371 (Balance Peak High)
( $1 * 0.2566 (fraction of percent) ) + $1 = $1.2566 (Equity Trough Low)
Once we have these two bits of information, we can then easily see what the draw-down was:
( Equity Trough Low - Balance Peak High ) / Balance Peak High * 100 = Draw-down (%)
Which would look like:
( $1.2566 - $1.4371 ) / $1.4371 * 100 = 12.56% DD
Ok, so why is it other sites display different results? Who should I trust?
Firstly, can you identify discrepancies on other independent verification sites in relation to how Draw-down is calculated? Are you able to (hypothetically) formulate the same results that are displayed on their site using their data points (assuming you would know how to)? How often are their data points updated...
That is really up to the user to decide the credibility of the data they are viewing.
One thing for sure though, here at Simple Trader we are continuously improving our service to stay ahead of the curve, technologically and service-wise. We are at a good position right now where we can say with confidence that our stats module is producing results to a high precision (especially in relation to the equity curve).
With this said, it doesn't mean we are finished. We will always continue to make sure that we are providing the highest precision and understand there are minute areas that require our attention still. It's all in an effort to make sure we are offering the best service possible, and that everyone who utilizes our platform receives the reliability they require.
Subscribe to our blog to keep a close eye on our updates and improvements here: http://en.simpletrader.net/blog/
This is great for the much needed transparency our copiers require before allocating any funds in copying a given trader.
What I am wanting to do is outline with more clarity how it is we are able to do this and more importantly why it is you should be wary of other popular independent verification sites similar to ours.
How does the EA build Equity on Simple Trader?
First off, the EA monitors the equity high and low of all open positions and our servers then "pull" this data to build the charts on Simple Trader.
But how is it we build equity on historical trades? After-all, if the EA is not attached, we do not know the equity high and low for the open trades, never-mind the historical ones...
Let's walk through this to understand more:
Our EA like any other, is only limited to uploading the only relevant bits of information an MT4 platform holds (before considering any MQL4 code). These data points are:
- Canceled Orders
- Closed Trades (realised PnL)
- Swaps
- Commissions
- Deposits
- Withdrawals
- Open Trades
- Pending Orders
- Comments
- Magic Numbers
Now, if a user uploads their record to us for the first time, there is no way we would be able to obtain what the historical end-of-day open positions would have looked like (floating equity-wise), by only depending on the data points we pull straight from the terminal (as it is limited info). This data is simply not held within an MT4 terminal, thus forcing us (like any other verification site) to come up with a proprietary method in building the historical equity line accurately and without slowing down the EA.
So how does Simple Trader build the historical equity line?
Once we have imported all the data points the MT4 terminal provides, we then build our growth line (realised PnL) on an end of day basis: 23:59 GMT. In short, what percentage and monetary gain or loss was realised at the end of the day.
Once this is built, we then "look-back" to find each individual trade (server-side) and obtain which trade/s remained open at this end of day time (23:59 GMT). From here we then search and scan our multiple price feeds to find the fair extremity to which price went, giving us - relative to the trader at hand - what the trade/s would have looked like in their account (monetary and then percentages).
What's important to remember is that we are doing this on nearly the highest level of precision and will continue to refine this over time.
But how is Simple Trader calculating the Draw-down?
First off, we want to make everyone aware that you should be conscious of how some sites are calculating "draw-down" and the figures they are displaying in relation to the data they really have about the trader. You would want to ask yourself questions like: "how often are the data points updated" and "where do the figures derive from" etc.
Lets have a look at how we calculate draw-down using an example below:
This is a screenshot of the "Growth" chart on FX Viper. It is also referred to as a Time-Weighted-Return. In short, what would our $1 investment - since FX Vipers trading inception - look like to date.
Now, looking at the above screenshot, we can see his worst peak-to-trough (highlighted). Let's do some basic math to clarify how it is we are using these 2 figures to equate to a draw-down figure:
First off we invested $1 since inception. This means that our $1 would equate to the following at the highlighted points above:
( $1 * 0.4371 (fraction of percent) ) + $1 = $1.4371 (Balance Peak High)
( $1 * 0.2566 (fraction of percent) ) + $1 = $1.2566 (Equity Trough Low)
Once we have these two bits of information, we can then easily see what the draw-down was:
( Equity Trough Low - Balance Peak High ) / Balance Peak High * 100 = Draw-down (%)
Which would look like:
( $1.2566 - $1.4371 ) / $1.4371 * 100 = 12.56% DD
Ok, so why is it other sites display different results? Who should I trust?
Firstly, can you identify discrepancies on other independent verification sites in relation to how Draw-down is calculated? Are you able to (hypothetically) formulate the same results that are displayed on their site using their data points (assuming you would know how to)? How often are their data points updated...
That is really up to the user to decide the credibility of the data they are viewing.
One thing for sure though, here at Simple Trader we are continuously improving our service to stay ahead of the curve, technologically and service-wise. We are at a good position right now where we can say with confidence that our stats module is producing results to a high precision (especially in relation to the equity curve).
With this said, it doesn't mean we are finished. We will always continue to make sure that we are providing the highest precision and understand there are minute areas that require our attention still. It's all in an effort to make sure we are offering the best service possible, and that everyone who utilizes our platform receives the reliability they require.
Subscribe to our blog to keep a close eye on our updates and improvements here: http://en.simpletrader.net/blog/