Despite the wide range of investment products, it is difficult to choose a reliable investment account. The main problems that are common to the majority of accounts are the same: high level of drawdown with relatively low profitability, trading aggressiveness, lack of stability.
Let's examine the principles of choosing a good account... As an example, let's consider a managed account of Dragon Treasures on the platform of the broker ICE FX: let's evaluate the manager's trading according to the criteria of profitability, stability and security.
Description of the trading strategy
Market analysis by Dragon Treasures trading rules consists of three stages. The manager daily investigates the fundamental factors that can affect the market price of a financial instrument, uses candlestick analysis and the author's method of analysis of the low-liquid market.
Dragon Treasures' trading strategy has been tested on the history of markets over a 30-year period. This allowed the author to eliminate weaknesses, to establish and remove factors that reduce the profitability of the trading system.
Trading is conducted during the Asian and Pacific sessions, when the market activity is at a minimum level. The trades are opened in the pre-market, which reduces the risk of losses due to suddenly increased volatility.
The author and account manager of Dragon Treasures is trader Semyon Malakhovetsky.
Public monitoring of Dragon Treasures account on the independent website myfxbook is available since 2013. The profit curve for this period shows stable growth.
Dragon Treasures' trading strategy is one of the few that has a lifetime of more than 6 years. This period is sufficient to assess the profitability of the trading system, the level of risk it is exposed to, its predictability and reliability.
On the platform of the broker ICE FX the trading strategy is included in the rating "A" - the list of accounts with a high level of reliability and safety according to the investment analysts of the Company.
General analysis of profitability and risks of Dragon Treasures trading strategy
According to myfxbook monitoring data for the period from 2013 to 2018, the trading strategy brought 5693% of profit. The average monthly return was 7.99%. This is a very good result for a conservative trading strategy, but it should be considered in conjunction with the drawdown.
Over the entire period of its existence, the strategy has shown a maximum drawdown of 30% only twice - in 2014 and 2016.
The author specifies that the trading system has a maximum drawdown level of 30% with a higher periodicity (1-2 times a year), while maintaining the current profitability of the account. At the moment, the worst-case scenario stipulated by the manager has never come true.
Dragon Treasures trading strategy shows one of the highest ratios between profitable and losing trades. According to the myfxbook monitoring, the orders were closed with a profit in 98% of cases. Only 2% of the total number of transactions were closed with a loss.
Closing of trades by the trading strategy is carried out using one of two options: when the position reaches a loss of 30% or manually, based on the analysis of market factors. Most often, orders are closed according to the second scenario. In this case, the loss in the trade is much lower than the planned 30%. For example, in 2019, the strategy showed a maximum drawdown of 12%, while the profit has already exceeded 49%. This can be seen from the open monitoring of Dragon Treasures account at ICE FX website.
Expected profit level in one deal is equal to 5%.
Only two of the 100 deals will be closed with a loss. The remaining 98 will bring profit. The size of losses will be equal to 60% (2*30%), and the amount of profit - 490% (98*5%). The net profit of the trading strategy when using the average forecasted indicators and the current statistics on the ratio of profitable versus losing orders will be 430% for every 100 closed orders.
Such calculations are conditional and cannot be used to predict investment activity, since past income does not guarantee future earnings. However, from the mathematical point of view, they clearly show the prospects of Dragon Treasures strategy in the long-distance.
We will sum up and analyze the trading strategy of Dragon Treasures from the standpoint of basic criteria of safe investment:
- The lifetime of the account.
To invest, we should consider PAMM-accounts with a history of at least 12 months track record. The majority of accounts, which use unsafe trading methods, do not "survive" up to a year. Dragon Treasures investment product shows stable results since 2013.
- Profitability graph.
In the case of safe PAMM accounts, the profitability graph is similar to a smoothly growing curve without sharp spikes in either direction. This is exactly what the Dragon Treasures profitability chart looks like.
- The ratio of profitable to loss-making trades.
A good ratio of profitable versus losing trades is 60/40 (60% of profitable trades, 40% - losing). In the trading strategy of Dragon Treasures 98% of orders are closed with profit.
- The level of maximum drawdown.
In safe PAMM-accounts the maximum drawdown level does not exceed 30%. This indicator in Dragon Treasures trading strategy was achieved only 2 times in 6 years of the account lifetime.
The trading strategy of Dragon Treasures is not characterized by abnormal fluctuations in profitability and drawdown periods. This indirectly indicates that the manager does not use aggressive and unsafe ways to increase funds in trading on the currency market.
The author of the trading strategy Dragon Treasures is open for contacts. In order to facilitate communication with its investors, a separate group has been created. It allows you to follow the dynamics of the manager's trading, learn the latest news and ask questions about the manager's trading.