The yield curve within the Copy Trading service is plotted based on the time-weighted rate of return (TWR) calculation method. The TWR method breaks an account’s trading history into intervals that occur as a result of balance transactions (such as deposits or withdrawals). The return is individually calculated for each interval that had no balance transactions. The total account return equals the cumulative product of returns from all intervals.
Formula for calculating return for one interval:
where:
- Equity(2) — funds as of the end of the interval (before replenishment/withdrawal)
- Equity(1) — funds as of the beginning of the interval (before replenishment/withdrawal)
For instance, suppose you made one deposit and generated profit on your trades:
- Deposit — $100(1)
- Profit — $50
- Balance after trading — $150(2)
- ((150 / 100)-1) * 100% = 50% return for this interval
Formula for calculating total return:
where:
- Equity(2) — funds as of the end of the interval (before replenishment/withdrawal)
- Equity(1) — funds as of the beginning of the interval (before replenishment/withdrawal)
- Equity(4) — funds as of the end of the subsequent interval (before replenishment/withdrawal)
- Equity(3) — funds as of the beginning of the subsequent interval (before replenishment/withdrawal)
For example, you traded and made several withdrawals:
Interval 1
- Deposit — $100(1)
- Profit — $50
- Funds before withdrawal — $150(2)
- Withdrawal — $70
- Funds after withdrawal — $80
Interval 2
- Funds as of the beginning of the interval — $80(3)
- Loss — $5
- Funds before withdrawal — $75(4)
- Withdrawal — $20
- Funds after withdrawal – $50(5) — are not taken into account in the formula, since there are no more withdrawals/deposits
Total return: ((150 / 100) * (75 / 80) -1) * 100% = 40.6%
The copy trading service takes some time (usually less than one second) to copy signals to an investor’s account, which, in turn, can lead to minor deviations in the execution prices.
The profitability of an investment account may differ from the profitability of a Strategy since several strategies with different profitability can be alternately copied to one investment account, as well as one Strategy at different time intervals.