Help needed on my trading detailed statement report!

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Sherman_Liew 2016.02.02 23:10


I have assigned my funds to an expert trader who claimed to have more than 10 years of trading experience.

However the recent detailed report results made me very worried, can any kind soul please advice me based on the results? (2 weeks ago and today)

      Closed trades :
      Commission : -136 530.00         Swap : -4 926.71         Profit : 134 045.95
      Closed P/L : -7 410.76

      Open trades :
      Commission : -4 350.00              Swap : -1 537.61         Profit : -161 457.00
      Floating P/L : -167 344.61

      lgd opened position : -44 lots & +43 lots

      Absolute Drawdown: 11 056.50     Maximal Drawdown: 100 370.33 (90.81%)     Relative Drawdown: 90.81% (100 370.33)

      Closed trades :
      Commission : -179 830.00        Swap : -6 315.75          Profit : 156 591.51
      Closed P/L : -29 554.24

      Open trades :
      Commission : -5 950.00              Swap : -2 609.82         Profit : -301 136.00
      Floating P/L : -309 695.82

      lgd opened position : -69 lots & +50 lots

      Absolute Drawdown: 30 793.73     Maximal Drawdown: 121 522.95 (109.95%)     Relative Drawdown: 109.95% (121 522.95)

 From what I understand from news this 2 weeks, gold has been bullish both technical and fundamental. But he his trades are mostly in favour of shorting gold.

 He has been telling me that his trading strategy is safe and he will hedge to minimize risk, however I do not think this is what I see from the report. What does the maximal drawdown of 109.95% mean?
 Why would he want to "hedge" by buying additional long positions instead of closing his opened short positions if he feels that market is not in his favour? Is it wise to do so?

 We have a contract that indicates if he made a loss of 10%, he would stop all trading and topup the trading account back to capital value with his commission. When I asked him for the reason on the widening of negative floating P/L, he told me that it is normal, and paper loss is not considered a loss.
 In a period of 2 weeks my floating loss has doubled, can anyone advice what is the best way out with my investment with him?
 Should I remove the remaining capital out from the account before the damage gets bigger?
 I would appreciate it if any kind soul can give me your advice based on the reports. Thank You!


Technical_Speak 2016.02.03 20:39 #
Hello Sherman,

This is what I see based on the figures you have quoted above.
For closed trades, the commission paid is higher than the profit.
So at one glance it appears that all the profit made flows into the commission column.

I have also labelled 1)-5) on my answers to your queries.

1) Yes, you are right about the sentiments of gold. Technically speaking gold has started to turn bullish since beginning of the year and it is in the news as well.

If you have short positions in a bullish market, you will lose money - regardless if it is just a short lived one or for long term.

2) Safe trading involves risk management, money management, exposure, technical analysis skills etc.
For open trades on 21/1/16, it is considered a net short 1 open position.

If you have short 44 positions, in order to reduce the exposure, you should just close 43 short positions, and not open another 43 long positions.

By not closing the existing 43 short positions, you are only paying extra swap fees and commissions for no reason, without any improvement to the trading performance. Eventually you will still have to pay extra commissions to close all these extra positions you have opened.

2b) Max drawdown is an indicator of the risk of a portfolio chosen based on a certain strategy. It measures the largest single drop from peak to bottom in the value of a portfolio (before a new peak is achieved). This metric is good for identifying funds that preserve wealth by minimizing drawdowns throughout up/down cycles, and gives an analyst a good indication of the possible losses that this fund can experience at any given point in time.

Quote from
"One would hope that the maximum drawdown would be as small as possible. If an investment never lost a penny, the maximum drawdown would be zero. The worst possible maximum drawdown would be 100%, meaning the investment is completely worthless. Most maximum drawdowns will fall somewhere between these two extremes."

Based on your figures, the trading strategy used is extrememly risky. The figures also reveals that the opened positions would have already wipe out everything and beyond at 100%. So it appears that there must be a top up to your account before to salvage the situation from a complete loss, thus it reflects a scenario of Max DD beyond 100%?

3) Hedging is usually used if you are unable to liquidate your existing positions (as a shareholder you can't liquidate your shares, as a fund manager you can't have 0% investments and 100% cash), hence you use another higher leverage vehicle to hedge or preserve your capital value. It would be foolish to incur more new opposite positions in order to neutralise your trades, when there is no advantage by doing so.

If you feel that your right hand is overloaded and you are tilting to one side, will you let go some weight on the right, or continue to carry more on the left so as to achieve balance?

4) "Paper loss is not a loss" explanation only makes sense on less volatile vehicles such as stocks (still volatile, just lesser than futures) as there is value creation (business growth etc). It cannot go to zero or negative at 5pm today, and then back up to 200% in the next few days.

This explanation is not applicable to risky and volatile instruments such as futures & commodities, where it can wipe you out in a period of 2 hours, and then swing back up to 200% profit after you are entire wiped out.

The paper loss is "the damage already done, reflected under a different section". It is "not considered a loss" ONLY IF you have made an equivalent floating profit, so that your floating P/L becomes 0 again. Otherwise the figure is showing the money that is already not in your account anymore.

If it is "normal" like what he said and the money is still yours, try closing all the positions and reopen all the exact same positions again, and the truth will be obvious to all. Otherwise it is a clear cut manipulation of the situation as you have a contract agreement with him.

Based on the 2nd report, within 2 weeks the bleeding doubled. If he were to think the opposite way within this 2 weeks, your bleeding would be healed by now. It also means he could have continue doing the same thing and you will be wiped out in no time.

5) If you found more and more worms growing in your apple basket, what will you do?

Any sound trader will reduce positions to preserve unneccessary commission and swap charges in your current situation.
If anyone wants to short the market, they will logically reduce the opened long positions, instead of creating new short positions that does more damage to your portfolio.

An upright money manager will make his profit from the market (out of the pie), but an unscrupulous one will just focus within the pie that he is sharing with.

I hope this is helpful enough for you to get out of your situation soon!

All the best

The_Guru 2016.02.05 20:26 #
Hi Sherman,

In Forex, you can understand your statement by looking at this 2 important figures.

Balance = Amount you have started with.
Equity = The true value of your investments as at now (whether you have open positions).

Most beginners confuse Balance as the actual value.
Balance is the "initial capital" and will not fluctuate unless you have closed some positions.

Your true value during performance evaluation is the "Equity".

This is how periodic performance is measured without interfering fund managers activities.

Therefore, all you need to look at is this two figures to determine your current performance.

It is measured using "Equity/Balance x100" over a specific period of time.

Eg 1:
Balance = 100k,   Equity = 85k,
P/L = -15%.

Eg 2:
Balance = 100k,   Equity = 116k,
P/L = 16%.


Sherman_Liew 2016.02.09 08:06 #
Hi All,

Thank you so much for the precise explanation!
I have few more questions from the periodic report which I hope you can help to explain.

All time report, up to 21/1/16 :
Balance: 906 405.62     Equity: 739 061.01      Floating P/L: -167 344.61     Margin: 44 000.00     Expected Payoff:  -8.93
Closed Trade P/L:   -7 410.76    

Report for 2016, on 6/2/16 :
Balance: 791 797.48     Equity: 465 348.16      Floating P/L: -326 449.32     Margin: 79 000.00     Expected Payoff:  -236.96
Closed Trade P/L: -65 402.08      Total Commission for 2016 : -112 715.00     Total Swap : 6963.10

Report for 2016, on 9/2/16 :
Balance: 794 533.58     Equity: 448 165.72      Floating P/L: -346 367.86     Margin: 94 000.00     Expected Payoff:  -224.61
Closed Trade P/L: -62 665.98      Total Commission for 2016 : -115 915.00     Total Swap : 7564.54

1) What does expected payoff mean?
2) The closed trade P/L has reduced from 6/2 to 9/2, does that mean that the performance has improved and we are making money?
3) Can you give your opinion based on the performance with these figures? 

I really appreciate it, thanks!

The_Guru 2016.02.09 09:18 #

Hey Sherman,

1) Expected payoff — mathematical expectation of win. This parameter to be calculated statistically represents average profit/loss factor of one trade. It can also be considered as showing the expected profitability/unprofitability of the next trade;

-236 means on the average for every trade made, you are losing $-236 for year 2016. If it is -ve, the more you trade, the more you bleed.
You can also refer to

2) Closed Trade P/L & Balance does not reflect the your portfolio financial health.
This figure can be "manipulated", and is not the final figure unless you have closed all open trades.

For instance, if you have $100k, with 2 open trades of a) paper loss -$65k and b) paper gain +$20k.

At this juncture, you will have
Balance : $100k,    open P/L : -$45k,    Equity : -$55k.

If you close your $20k position, then you will have
Balance : $120k,    open P/L : -$65k,    Equity : -$55k.

You may thought that you are making a 20% profit, but your actual situation is you have loss 45%.
If the open P/L gets bigger, you will be forced to close all your positions by margin call etc, and you will see that your Balance = Equity. When this happens, you are considered to have lost everything.

Equity (balance) is always the true value used for financial evaluation at any point of time in forex, and this is the figure used to measure fund performance.

So in short, refer to the equity. As at :
21/1/16,  investment value = $739 061.01
6/2/16,   investment value = $465 348.16  (loss $273712.85 from 21/1 to 6/2)
9/2/16,   investment value = $448 165.72  (loss $17182.74  from 6/2 to 9/2)

Summary : You have loss 40% of your equity balance in about 2 weeks from 21/1/16 to 9/2/16 ($448165.72 / $739061.01)

3) Let me put it this way,
Commissions : money that goes out from your account to your broker.
Margin      : deposit for all positions that you are holding.
Swap        : wastage for holding on to the positions overnight, unless the profits for holding can cover the cost of swap.
Equity      : what you are left with after the trades (your true value).

As at 21/1/16 :
The activity of using $44k of margin to deplete about 4x its capital value, is considered gambling and not trading.

As at 6/2 and 9/2/16 :
In 2 weeks, the opened positions double up and so are the losses, 4x its capital value.

Dude, I really hope to still see you in 1-2 months at this rate you are going.
Do not use more good money in the attempt to recover lost bad money. Close everything and start new will be better as there is no baggage when you trade, and you don't have to burn anymore swap fees.

Futures is a zero sum game, your losses has profit whoever that exchange trades with you.
Furthermore your swap is also bleeding you, and the Commissions paid out in 2016 is too amazing in the industry.

Take note that there are scam traders who either churn your commissions, or do a "opposite trade" with you to transfer out money from your losses to their gains. This is illegal and can still happen unless your platform is operating on straight through processing (STP).

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