WSOT Score Methodology -
Description and Variations
Parameter: Equity Performance
Interpretation: the bigger the value, the better
Formula: [(Ending Equity - Beginning Equity) / Beginning Equity]
Description:
In the trading tournament, we calculate each trader's equity performance to
measure how well their trading account grows over time.
In case there are balance operations (deposits/ withdrawals) during the course
of the tournament, we process them by forming a new base for subsequent
performance calculations. Please note that in case of deposits, we will form a
new base by adding the deposit amount at the beginning of the statement
period - before we have taken into account generated P&L.
In case of withdrawals, we will be forming the new base at the end of the
statement period - after we have taken into account the generated P&L.
Here's how it's done:
1. Starting Equity: At the beginning of the tournament, each trader starts with
a certain amount of funds in their trading account. This amount is their starting
equity.
2. No Balance Operations: If a trader doesn't make any deposits or
withdrawals during the tournament, calculating their performance is simple.
We use the ending equity (current account value) and the beginning equity
(account value at the start) to find the percentage change in equity.
3. With Balance Operations: When a trader makes a balance operation
(deposit or withdrawal), we need to adjust the performance calculation based
on these changes. Each time there's a balance operation, we create a new
base for subsequent performance calculations.
4. Example: Let's look at an example to understand better:
Week 1:
Suppose a trader started with $100,000 in equity in week 1. At the end of the
week, after some trades, their account grew to $130,000, giving them a 30%
performance. The applied formula is: ((Ending Equity – Beginning
Equity)/Beginning Equity) *100
Week 2:
In week 2, the trader decided to deposit an additional $30,000 into the
account. Also, during that week, he generated a profit of $50,000.
In order to calculate the performance percent for week 2, we have to form a
new base because there was a balance operation that week. Since the
balance operation is a deposit, we will form the new base at the start of the
week before processing the generated P&L. In other words, we would assume
that in week 2 the trader first made a deposit of $30,000, and after that, he
made a P&L of $50,000.
Therefore, the new base becomes $160,000 (Beginning Equity of Week 1 of
$130,000 + Deposit of $30,000).
In other words, the base for subsequent performance calculation is formed by
taking into account current Equity and the balance operation.
In case of a deposit, we add the deposit to the beginning equity of the
considered period (this way, we have already formed a new base before the
current period P&L is considered as performance).
In case of a withdrawal, we will subtract it from the beginning Equity of the
considered period after the P&L for that period is considered as performance
– therefore, we will use the previous performance base for the current period,
and we will form a new base that will be used from next period onwards (until
a new balance operation is performed).
The performance percentage for week 2 is going to be 31.25%: (($50,000 /
$160,000) * 100). The total performance so far becomes 61.25%:
Performance of week 1 + Performance of week 2 (30% + 31.25%).
Week 3:
In week 3, a P&L of -$20,000 was generated. The trader faces a loss of
$20,000, reducing the account equity to $190,000. We calculate this loss's
performance percentage based on the $160,000 base (the last base is used
because we do not have new balance operations).
The performance percentage for week 3 is going to be -12.50%: ((-$20,000 /
$160,000) * 100). The total performance so far becomes 48.75%:
Performance of week 1 + Performance of week 2 + Performance of week 3
(30% + 31.25% + (-12.50%)).
Week 4:
In week 4, a withdrawal of $40,000 and a P&L of $15,000 were generated in
the trader’s account.
Please note that when a withdrawal type of balance operation occurs, the
performance for the observed period is considered first (old performance base
is used) and then the balance operation is taken into account (new base is
formed after P&L for the current period has been processed and the new base
will be used for subsequent periods).
In other words, we would assume that in week 4, the trader first generated
$15,000 P&L, and after that he withdrew $40,000; therefore, for week 4, we
will be using the last performance base of $160,000.
The new base that will be used for the next period will be $165,000: Beginning
Equity for week 5: Beginning Equity of week 4 + P&L for week 4 – Withdrawal
for week 4 ($190,000 + $15,000 + (-$40,000))
Therefore, the performance percentage for week 4 is going to be 9.38%:
(($15,000 / $160,000) * 100). The total performance so far becomes 58.13%:
Performance of week 1 + Performance of week 2 + Performance of week 3 +
Performance of week 4 (30% + 31.25% + (-12.50%) + 9.38%).
Week 5:
In week 5, a P&L of -$25,000 was generated.
As noted above, we had a withdrawal operation in the previous period;
therefore, for the current period, we are going to use a new performance base:
$165,000.
The performance percentage for week 5 is going to be -15.15%: ((-$25,000 /
$165,000) * 100). The total performance so far becomes 42.97%:
Performance of week 1 + Performance of week 2 + Performance of week 3 +
Performance of week 4+ Performance of week 5 (30% + 31.25% + (-12.50%)
+ 9.38% + (-15.15%)).
Final Performance:
The trader's total performance from the start of the tournament is the sum of
all the performance percentages from each period. In this example, it's 30% +
31.25% + (-12.50%) + 9.38% + (-15.15%) = 42.97%.
Leaderboard Ranking:
The trader's total current performance of 42.97% is reflected in the ranking
table on our website.
Parameter: Normalised Profit Factor
Interpretation: the bigger the value, the better
Formula: (Total Profit - Total Loss) / (Total Profit + Total Loss)
Description:
The Profit Factor is a ratio that compares the total amount of profit generated
by winning trades to the total amount of loss incurred from losing trades. It
serves as an indicator of the risk-reward profile of a trading strategy and can
reveal the potential sustainability of the trader's approach.
A positive Profit Factor value indicates that the trading strategy has generated
more profit than loss. The higher the Profit Factor, the more profitable the
strategy is relative to its losses.
Parameter: Sharpe Ratio
Interpretation: the bigger the value, the better
Formula:
Sharpe Ratio = (Return - RiskFree)/Std
Return = [((Equity1 - Equity0)/Equity0) + ((Equity2 - Equity1)/Equity1) +
((Equity3 - Equity2)/Equity2) + ((EquityN - EquityN-1)/EquityN-1) / N]
Risk Free = 0%
St Deviation = Square Root of ( [ {((Equity1 - Equity0)/Equity0) - Return}^2 +
{((Equity2 - Equity1)/Equity1) - Return}^2 + {((Equity3 - Equity2)/Equity2) -
Return}^2 + {((EquityN - EquityN-1)/EquityN-1) - Return}^2 ] / N )
Description:
The Sharpe Ratio is a fundamental financial metric that evaluates the
risk-adjusted performance of an investment or portfolio. It provides a concise
measure of how well an investment has generated returns in relation to the
level of risk taken to achieve those returns.
In essence, the Sharpe Ratio helps investors assess whether the potential
gain from an investment justifies the associated level of risk. It takes into
account both the investment's return and the volatility of those returns.
The formula for the Sharpe Ratio is straightforward: it calculates the excess
return (the difference between the investment's return and the risk-free rate)
divided by the standard deviation of the investment's returns. The resulting
ratio quantifies how much return an investor is receiving per unit of risk.
A higher Sharpe Ratio indicates a more favourable risk-return profile,
suggesting that the investment has delivered better returns relative to its
volatility. Conversely, a lower Sharpe Ratio implies that the investment's
returns have not compensated for the level of risk assumed.
Parameter: WSOT Score
Interpretation: the lower the value, the better
Formula:
Example:
Equity Performance - 4th place;
Profit Factor - 2nd place;
Sharpe Ratio - 3rd place.
Average player's position: (4+2+3)/3 = 3
=> WSOT Score: 3
