Last year, I talked about Covestor and why it may become the future of how investors and traders verify their claims of how good they are. Go ahead, spend a few minutes to read the post HERE. I joined in July of 2008 as 'geccobite' (which I no longer use and is closed) in favor of my current account that is the same name as my website. It was basically a test account of that I traded but did not totally focus on it, since my other (main) account is my bread and butter and therefore required most of my time. Covestor says I have a -16% return since inception. On the surface, it would appear as though I suck badly as a guru. This is based ONLY on equities trading, without considering cash holdings. That distinction is very important to understand. In my opinion, money management is the most important element of stock trading and must always be considered, because in the real world, real returns are measured with cash inclusion. When Covestor measures and ranks traders, it does NOT consider cash holdings; hence it doesn't consider money management. For example, if you use 10% of your money and buy a stock and that stock goes up 100%, your real return is actually 10%, but Covestor sees as though you gained 100% in your entire portfolio! That's why good penny stock traders rank very high on Covestor, with ridiculously misleading returns. If you look at the top rankings list HERE, what you will see is most traders on the top 100 list are actually penny stock traders, which in reality is not very accurate IF YOU CONSIDER CASH POSITIONS. Here's what I said in the previous posting regarding Covestor:
Covestor does have some issues, however, that probably needs to be addressed. One major one I find is that it doesn't consider cash at hand in their calculations. So if you make one trade on one stock only, for instance, with 10% of your money, Covestor sees it as though you put in 100% of your money. This gives successful penny stock players somewhat of an unfair advantage in the rankings, if anyone cares about rankings at all. In real world situations, a trader can put in 100% of his money into something like GOOG (actually, that is quite typical if you're trading GOOG), but rarely does anyone put 100% of their trading account in one (or even two or three) penny stocks. Yet, this is how Covestor makes the calculations. The nature of penny stocks is that they move much more percentage-wise than bigger stocks. This is the reason many of the good penny stock players are way up in the rankings, with massive annualized returns. I'm sure Covestor is on its way of making changes to this by considering cash positions.
Good news, Covestor now considers cash holdings! To see this, let's go back to my geccobite page (screenshot below is the only thing left of the account). Look at the 'Performance' box by scrolling down. Under the word 'Performance', you should see a pulldown box. The default data is "geccobite equities", which says I have a -16% return since inception. Now, go to the pulldown box and choose "geccobite equities & cash". Here's what you should see:
Follow me and see if I'm gonna kick arse again this year.
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Covestor does have some issues, however, that probably needs to be addressed. One major one I find is that it doesn't consider cash at hand in their calculations. So if you make one trade on one stock only, for instance, with 10% of your money, Covestor sees it as though you put in 100% of your money. This gives successful penny stock players somewhat of an unfair advantage in the rankings, if anyone cares about rankings at all. In real world situations, a trader can put in 100% of his money into something like GOOG (actually, that is quite typical if you're trading GOOG), but rarely does anyone put 100% of their trading account in one (or even two or three) penny stocks. Yet, this is how Covestor makes the calculations. The nature of penny stocks is that they move much more percentage-wise than bigger stocks. This is the reason many of the good penny stock players are way up in the rankings, with massive annualized returns. I'm sure Covestor is on its way of making changes to this by considering cash positions.
Good news, Covestor now considers cash holdings! To see this, let's go back to my geccobite page (screenshot below is the only thing left of the account). Look at the 'Performance' box by scrolling down. Under the word 'Performance', you should see a pulldown box. The default data is "geccobite equities", which says I have a -16% return since inception. Now, go to the pulldown box and choose "geccobite equities & cash". Here's what you should see:
Follow me and see if I'm gonna kick arse again this year.
Get my system and learn how to do it yourself.
