The problem with eToro stats.

In response to an influx in questions from eToro users whom are now questioning how a PI may be in profit, when their copy of that same PI is not at all even close to being in profit, I have broken down how eToro performance stats work.

Here is my post on the topic, in the hope that in the future, people will pay more attention and scrutinise the claims of Popular Investors on the platform, rather than believe what they see blindly.

Enjoy!

𝙃𝙤𝙬 𝙩𝙤 𝙠𝙣𝙤𝙬 𝙬𝙝𝙞𝙘𝙝 𝙋𝙤𝙥𝙪𝙡𝙖𝙧 𝙄𝙣𝙫𝙚𝙨𝙩𝙤𝙧𝙨 𝙖𝙧𝙚 𝙖 "𝙜𝙤𝙤𝙙 𝙘𝙤𝙥𝙮" 𝙗𝙖𝙨𝙚𝙙 𝙤𝙣 𝙥𝙧𝙞𝙤𝙧 𝙝𝙞𝙨𝙩𝙤𝙧𝙮? 𝘼𝙣𝙙 𝙬𝙝𝙞𝙘𝙝 𝙩𝙤 𝙖𝙫𝙤𝙞𝙙? 

It's been a topical debate for months, even years. People copy those fancy black star PI's, or some upcoming popular investor, they rocket with the copier numbers, all hoping amazing gains, based on their prior history and the assumption such a trend will continue in the future. 

It makes sense right? You copy the people whom have the best returns over a decent period of time, because statistically they are most likely to continue that trend.

Every so often, such a Popular Investor, or normal user, will pop up with a fantastic apparent bar chart, displaying amazing returns, better than that of even the famed Buffet. But more often than not, people copy these individuals, and they come back in a year, to a gain or loss not the same (or even close to) that of the copied PI. 

Why so? 

There are a few key reasons, some simple and some technical. 

𝙏𝙝𝙚 𝙇𝙚𝙜𝙞𝙩𝙞𝙢𝙖𝙩𝙚 𝙍𝙚𝙖𝙨𝙤𝙣𝙨: 

• You could have copied the PI with a lump sum, and never deposited since. If that PI then deposits, the sync you have will be broken and your gains will differ. They will (most likely) trade at different values to the ones you have open, or even open completely new positions which you may not pick up. Which is why it is key to add over time to a long term portfolio, known as Dollar Cost Averaging - DCA. 
• Some users are unable to take CFD positions, for example if you live in a country that prohibits the use of CFD's, you can't copy any short or leveraged positions on etoro (and I believe all crypto too). So if you copy a user with such positions, they will be skipped and you will not profit ( or lose ) from such trades, which will again logically cause a difference in your trades. It's important to therefore check the law in your region. Countries with a CFD ban include Belgium, USA and Hong Kong. Note: This also applies to Russian positions - any such positions currently open in a persons account, won't be opened on upon initiating a copy until the current restrictions are lifted. 
• Copying another user is often like buying a stock - you may well copy at a last high of their equity, or at a low. So timing is also a key factor, whilst the PI may be in overall profit, you could copy just before they suffer a large decline, they may well still be in profit, but you will be at a loss, much like a person who bought $TSLA (Tesla Motors, Inc.) at $10 would still be in profit if it now dropped 40%, but new buyers would be at a loss. 

𝙏𝙝𝙚 𝙏𝙚𝙘𝙝𝙣𝙞𝙘𝙖𝙡 𝙍𝙚𝙖𝙨𝙤𝙣𝙨: 

The bar chart, displayed in a users profile overview, is a representation of a copy worth $10k at the start of the year. Many users take this measure at face value, to represent another's' performance. Yet in reality, this is only one measure of stats, and should be used in conjunction with others. 

• This bar chart is affected by deposits. Here is a clear example: 
• If I trade with $100 in January, and lose $50 - I have a 50% loss. 
• Now if I deposit $10k at any point after this 50% loss, and make a profit of $1k (10%) - Etoro will still calculate me to be at a loss, despite my account statement being in profit. 
• This makes your bar chart show some huge negative red bar, and your closed trades stat (found by selecting a users portfolio ---> history) will show a significant profit. 
• The calculation etoro uses, can be found in more detail here:
• www.etoro.com/news-and-analysis/etoro-updates/new-user-stats-page/ 
• It is important to note, that this can be tricked to also show a deposit as being a "profit" - thus manipulating stats to show profit higher than reality. 
• This trick involves depositing at a certain time each month, which you will find many users doing - not all knowingly - but it does impact their stats beyond what you would get if you copied. 

A very small number of users, well known to those whom spend too much time on the platform, are / have been using, a trick involving using dividends to manipulate stats way beyond reality, this is a lot more complicated and I won't explain how to do so, but this is easily noticeable by following some steps below: 

𝙃𝙤𝙬 𝙩𝙤 𝙠𝙣𝙤𝙬 𝙞𝙛 𝙄 𝙘𝙖𝙣 𝙩𝙧𝙪𝙨𝙩 𝙖 𝙥𝙚𝙧𝙨𝙤𝙣𝙨 𝙨𝙩𝙖𝙩𝙨? 

I remember a quote from by a PI here @FundManagerZech - 𝙏𝙝𝙚 𝙗𝙞𝙜𝙜𝙚𝙨𝙩 𝙥𝙧𝙤𝙗𝙡𝙚𝙢 𝙥𝙡𝙖𝙜𝙪𝙞𝙣𝙜 𝙛𝙞𝙣𝙖𝙣𝙘𝙚 𝙞𝙨 𝙩𝙧𝙪𝙨𝙩  

Ask the average person, and they will tell you the stock market is a manipulated instrument full of fraud and Ponzi's, scammers and tricksters. 

It may well be true, but the stock market is also a vehicle for wealth, you just have to do your own due diligence and use a bit of common sense. 

So on that note, here is how you can verify a persons prior history is as accurate as they claim: 

1. A persons "true" return - the one displayed in their account statement + their open position value - can be calculated by their 𝙘𝙡𝙤𝙨𝙚𝙙 𝙩𝙧𝙖𝙙𝙚 % + 𝙤𝙧 - 𝙩𝙝𝙚𝙞𝙧 𝙤𝙥𝙚𝙣 𝙥𝙤𝙨𝙞𝙩𝙞𝙤𝙣𝙨. Since the 𝙘𝙡𝙤𝙨𝙚𝙙 𝙩𝙧𝙖𝙙𝙚 % 𝙘𝙖𝙣𝙣𝙤𝙩 𝙗𝙚 𝙢𝙖𝙣𝙞𝙥𝙪𝙡𝙖𝙩𝙚𝙙, and their open positions are always representative of their current gain (exceptions for spin off shares which will display a ridiculous 66,000% gain or so, or Russian stocks which will show a -99% result whilst the stock is not tradable) - this stat is always accurate. 

If the result of this calculation roughly adds up to their bar chart, you can trust this users stats and their claim. If there is a large discrepancy between the 2 values - it would be smart to question this, politely, with such an individual. An honest person would be comfortable to explain this difference, and a liar will react badly or ignore entirely. 

The result of this calculation is exactly what every government looks at when you pay your taxes. It is therefore an indisputable calculation. *

* A note on the above - the statement that "you should compare the monthly / yearly stats to the closed trade stats you can see if they match" , only works in cases where a set of trades were opened within the same 12M timeframe.

 For example a user with positions opened in 2021 on XRP at $1.50 would now have a hugely negative return (-70%) however this year XRP has increased in value compared to December 2022. 

Their bar chart will therefore display a positive gain this year, and their closed trades will show nothing, since they have made no new trades since entering XRP "all-in". We can therefore not calculate their "true return", since we cannot see beyond 12M ago for their closed trades.

Thanks to @ukjoehk for highlighting this exception.

I am working on a way to solve this, and will update in the future if I find a solution

2. Sometimes, a Popular Investor has a phenomenal ( for example ) 2020 bar chart, followed by lower gains for the rest of their trade history. This can be for a few reasons: 

• 2.1 They may have taken a 𝙝𝙞𝙜𝙝𝙚𝙧 𝙧𝙞𝙨𝙠 𝙞𝙣 𝙥𝙧𝙞𝙤𝙧 𝙮𝙚𝙖𝙧𝙨, before they became a PI, for example invested in crypto at the lows and took profit at the highs. I've seen a few such accounts which are now dividend portfolios, with inevitable far lower risk, and thus gains / losses. 𝙒𝙚 𝙘𝙖𝙣 𝙤𝙣𝙡𝙮 𝙨𝙚𝙚 𝙗𝙖𝙘𝙠 1 𝙮𝙚𝙖𝙧 𝙤𝙛 𝙩𝙧𝙖𝙙𝙚 𝙝𝙞𝙨𝙩𝙤𝙧𝙮, so we have no way to know what risk people took in the distant past - so bare in mind 𝙥𝙧𝙞𝙤𝙧 𝙝𝙞𝙨𝙩𝙤𝙧𝙮 𝙢𝙖𝙮 𝙝𝙖𝙫𝙚 𝙞𝙣𝙫𝙤𝙡𝙫𝙚𝙙 𝙖 𝙨𝙩𝙧𝙖𝙩𝙚𝙜𝙮 𝙙𝙞𝙛𝙛𝙚𝙧𝙞𝙣𝙜 𝙩𝙤 𝙣𝙤𝙬. 
• 2.2 The user may have experienced a rare event, that is statistically unlikely to happen again, such as the $GME (GameStop Corp.) explosion, or the $FRCB (First Republic Bank/CA) collapse. These events can give "one-off" significant changes to a persons portfolio through pure luck - read @ukjoehk "bob" posts for more on this factor.

𝙋𝙤𝙥𝙪𝙡𝙖𝙧 𝙄𝙣𝙫𝙚𝙨𝙩𝙤𝙧𝙨 𝙖𝙧𝙚 𝙧𝙚𝙦𝙪𝙞𝙧𝙚𝙙 𝙩𝙤 𝙨𝙩𝙖𝙮 𝙗𝙚𝙡𝙤𝙬 𝙘𝙚𝙧𝙩𝙖𝙞𝙣 𝙧𝙞𝙨𝙠 𝙡𝙚𝙫𝙚𝙡𝙨 (currently 7 max), and exceeding such results in copy blocking and potential termination of their PI status. You can see a users 𝙥𝙧𝙞𝙤𝙧 𝙧𝙞𝙨𝙠 𝙨𝙘𝙤𝙧𝙚𝙨 𝙤𝙫𝙚𝙧 𝙩𝙝𝙚 𝙡𝙖𝙨𝙩 12 𝙢𝙤𝙣𝙩𝙝𝙨 𝙤𝙣 𝙩𝙝𝙚𝙞𝙧 𝙨𝙩𝙖𝙩 𝙥𝙧𝙤𝙛𝙞𝙡𝙚 𝙥𝙖𝙜𝙚, just under their bar chart. 

If a user has a large change in their risk score ( for example from 8 to 2 ) recently, it would be wise to enquire what they did to take this high risk and lower it, and of course whether this will happen again according to their strategy.

Fun trick : Since etoro has an API, it is possible to access any public users risk score, and other stats, beyond the last 12 month period ordinarily visible through the very useful site : https://www.pi-screener.com

 𝙄𝙛 𝙩𝙝𝙚 𝙪𝙨𝙚𝙧 𝙘𝙖𝙣𝙣𝙤𝙩 𝙚𝙭𝙥𝙡𝙖𝙞𝙣 𝙩𝙝𝙚𝙞𝙧 𝙨𝙩𝙧𝙖𝙩𝙚𝙜𝙮, 𝙖𝙫𝙤𝙞𝙙. 𝘾𝙤𝙥𝙮𝙞𝙣𝙜 𝙨𝙪𝙘𝙝 𝙖 𝙪𝙨𝙚𝙧 𝙞𝙢𝙥𝙡𝙞𝙚𝙨 𝙩𝙝𝙚𝙮 𝙝𝙖𝙫𝙚 𝙣𝙤 𝙢𝙚𝙩𝙝𝙤𝙙𝙤𝙡𝙤𝙜𝙮 𝙛𝙤𝙧 𝙩𝙝𝙚𝙞𝙧 𝙩𝙧𝙖𝙙𝙚𝙨, 𝙖𝙣𝙙 𝙩𝙝𝙪𝙨 𝙬𝙞𝙡𝙡 𝙩𝙖𝙠𝙚 𝙖𝙣 𝙪𝙣𝙠𝙣𝙤𝙬𝙖𝙗𝙡𝙚 𝙧𝙞𝙨𝙠 𝙬𝙞𝙩𝙝 𝙮𝙤𝙪𝙧 𝙞𝙣𝙫𝙚𝙨𝙩𝙢𝙚𝙣𝙩. 

Here is a (fictional) example of a user with stats way beyond reality: 

Susie has a bar chart displaying a 100% YTD. It is June, and her 6M closed trade stats show a loss of -2%. 

For her 100% YTD stats to be true, her portfolio open positions must therefore add up to make the remaining gains. However the vast majority of her positions are either negative or minimal gains.

 It is therefore impossible her bar chart is an accurate representation. 

Here is another fictional example of a user with stats displaying a worse result than reality:

 Jerry has a bar chart showing -40% YTD. 

It is June, and his 6M stat is showing a gain of 28%. He has no open positions. Therefore his true return is +28% and his bar chart is not an accurate representation. 

Note: There is no way to see a YTD closed trade stat of any user other than yours.

Hence the use of June, the 6th month of the year, as a simplified example. This logic can still be applied using the 1Y stats and comparing to their last 12 months of returns.

𝙁𝙞𝙣𝙖𝙡 𝙣𝙤𝙩𝙚𝙨

 Etoro's calculations for stats in their bar charts is, overall, fair. 

For the vast majority, it represents a decent estimation of their portfolio gains, and their risk taken for such gains.

The number of inactive, buy and hold users here is significantly higher than the number of active, regularly depositing users.

Thus the stat representation is overall more accurate.

However, some users, particularly PI's are incentivised to be active on the feeds, regularly post and etoro reward this through monthly payments.

 If abused "correctly", manipulating your stats can result in a significant increase in copiers over a very short period of time. This is beneficial for PI's, especially once they are paid according to their AUM, rather than a fixed $500 monthly payment they all start with. 

Furthermore, some users may well be depositing larger sums over time, starting with low equity, which will negatively affect their stats.

It is important, more now than ever, to know how to:
𝙙𝙤 𝙮𝙤𝙪𝙧 𝙤𝙬𝙣 𝙙𝙪𝙚 𝙙𝙞𝙡𝙞𝙜𝙚𝙣𝙘𝙚, 𝙖𝙣𝙙 𝙣𝙤𝙩 𝙟𝙪𝙨𝙩 𝙛𝙤𝙡𝙡𝙤𝙬 𝙩𝙝𝙚 𝙘𝙧𝙤𝙬𝙙 𝙩𝙤 𝙩𝙝𝙚 𝙣𝙚𝙭𝙩 𝙘𝙤𝙥𝙮.

This post originated from :

https://www.etoro.com/posts/0__entry__0267d09e-2b74-4141-909c-63baa1dfea5f

Where I have modified and added additional information and screenshots.

The comment section may provide additional technical information and an in-depth discussion on these topics from some of the most knowledgeable users on the platform.

The post would have been impossible without technical support from:

@simonperkin

@felixfallax

@ukjoehk

And of course special mentions to:

@annahussain for being so encouraging but never lacking criticism

@Gr33nTrader for her continued and forever lasting support in my writing.

And finally to all my remaining copiers and followers whom boost my ego to unknown heights