Strategy Risk Rate in Copytrade: What Does It Mean for Investors?

Previously, we discussed various metrics that you can use to estimate strategy performance in Headway Copytrade social trading. In this article, let’s explore the risk rate of the strategies: how it is calculated, what it means for investors, and what strategies to choose based on this criterion.

What is the risk rate?

The risk rate is the potential for financial loss that arises from fluctuations in the value of traded assets. It is a strategy metric calculated based on the trading volume of a trader’s open positions. 

The proportion of a balance invested in open positions directly correlates with the strategy’s risk level. It is, therefore, a crucial indicator for anyone searching for a good strategy to copy.

For instance, if a trader is using 50% of their balance for trading, they are taking greater risks than strategy owners who invest only 25% of their balance. Because of this, the first strategy could be considered high-risk and the second strategy could be low- or medium-risk on Headway Copytrade.

You find the risk rate feature in a strategy card on the Investor Board and the strategy page. It can be a green, yellow, or red tag in the upper-right corner.

Risk calculation and types

The risk rate on Headway Copytrade is calculated with the formula:

Risk = Lots * 100,000 / Balance in USD

The Lots value is multiplied by 100,000 and divided by the Balance. When the trading volume (i.e., Lots) equals 0, the risk is not calculated.

On Cent and Fix Rate accounts and for specific groups of trading assets, the lot calculation is as follows:

• 1 lot on a Cent account = 0.01 lot on a Standard and Pro account;
• 1 lot of the Stocks (USA), Crypto, Indexes (Majors, FX), Energies, and Index instruments = 1 * Contract size * Price / 100,000;
• 1 lot of the Indonesian stocks and indexes = 1 * Contract size * Price / (15 000 * 100,000);
• When closing positions using ‘Close by’, the trading volume for such transactions is calculated as half of the volume of each position.

The calculation is run every time a new order is opened. The calculations are saved in the Copytrade system but are not displayed in the Personal Area. The maximum risk rate for the last 30 days defines the risk type that a strategy receives – and the risk type is displayed and updated every day:

• Low risk: from 0 to 100

When a strategy is low-risk, it means that the strategy owner is using money management rules and puts a reasonable amount of money into their trades.

• Medium risk: from 100 to 1000

Strategies with such values are for traders and investors who are ready to take risky positions in the market.

• High risk: from 1000

A high-risk strategy poses a greater danger to investors’ accounts. Usually, such strategies are outliers on the Investor Board.

How to find strategies with the necessary risk level?

In Headway Copytrade, you can use the risk rate as a search filter. To find strategies with an appropriate risk level, go to the Investor Board and click on the Risk tab above the strategy list. Choose the necessary risk rate (low, medium, or high). The list will be updated immediately.

High-risk or low-risk strategies: Which is better?

When compared to each other, both high-risk and low-risk strategies can work for you. Your willingness and readiness to risk will help you make the choice. 

😌 Low- and medium-risk strategies bring stable profits in the long term but may be underperforming in the short term. 

😎 If you want to get quicker profits, consider high-risk strategies. The risk is the driver of the market. When a strategy owner takes a high risk, they put in a lot compared to their capital – but when they succeed, their total profit outdoes the performance of low-risk strategies.

The best way to work with Headway Copytrade is to invest in multiple strategies at once. That way, you will balance low-risk and high-risk strategies out and get the most profit.

Conclusion: Risk rate

Consider the risk rate every time you are searching for a new strategy to invest. It is a reliable indicator of a strategy’s performance. We also recommend you study the performance chart and take other key metrics into account when making the right choice.

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