eToro shows metrics like annual ROI, Sharpe Ratio, and maximum drawdown—but these don't answer the key question: Which of these 500+ investors should I actually copy?
The Core Problem
Standard metrics compare traders in isolation, not against each other.
❌ Traditional Approach
Look at each trader's ROI independently
Trader A: +45% annual ROI
Trader B: +32% annual ROI
Conclusion: A is better
Problem: What if A achieved it with a -60% drawdown and B with -12%? You'd lose your entire investment copying A.
✓ Power Ranking Approach
Rank traders against comparable dataset
Compare all 500+ traders using identical formula
Account for recent performance (not just historical)
Penalize for drawdowns
Filter by consistency
Result: Single comparable score that reflects true risk-adjusted performance
Key Insight:
You need a metric that answers: "Of all 500+ eToro investors, who has shown the most reliable, consistent, risk-adjusted performance over recent months?" This is what Power Ranking solves.
Power Ranking combines three data points into a single comparable score using weighted mathematics:
Step 1: Linearly Weighted Average Monthly Performance (24-Month Period)
Why 24 months? Long enough to include market cycles (bull, bear, sideways), but recent enough to reflect current skill level.
Why linear weighting? More recent months matter more than old months. A trader who was great in 2023 but mediocre in 2024 should rank lower.
Step 2: Drawback Penalty (Risk Adjustment)
What it measures: How much the trader's losing periods hurt, applied as a penalty against their gains.
Critical Principle:
The penalty subtracts directly from the weighted average. This penalizes traders who take excessive risk, even if their good months are spectacular.
Step 3: Consistency Filter (% Positive Months)
What it measures: What percentage of the 24 months showed profit.
⚠️ Consistency is Non-Negotiable:
A trader with 50% positive months automatically gets a 50% reduction in score. This mathematically eliminates gamblers.
Full Formula
Interpretation Guide
Example: High ROI vs. Consistent Returns
Trader A: "The Gambler"
Annual ROI: +68%
Power Ranking Analysis:
Weighted average: 4.2%
Penalty: -12.6%
Positive months: 50%
Final Score: -4.2 (Disqualified)
✓ Trader B: "The Steady Hand"
Annual ROI: +32%
Power Ranking Analysis:
Weighted average: 2.1%
Penalty: -1.5%
Positive months: 83.3%
Final Score: 0.50 (Recommended)
Key Insight:
Trader A has 2x higher annual ROI but scores -4.2 (disqualified). Trader B scores 0.50 (recommended). Power Ranking correctly identifies that Trader A's gains come from excessive risk-taking, not skill.
Step-by-Step Process Using Power Ranking
- Filter by minimum criteria: Exclude traders scoring below 0.3 (too risky)
- Tier 1 allocation (50%): Traders scoring 1.0+
Why: Highest confidence, most consistent - Tier 2 allocation (35%): Traders scoring 0.6-0.99
Why: Solid performers, lower concentration risk - Tier 3 allocation (15%): Traders scoring 0.3-0.59
Why: Diversification benefits, unique strategies only - Tax optimization: Match trader frequency to your tax bracket
High earners: prioritize long-term traders (<1 trade/week, 90+ day holding)
Lower brackets: short-term traders acceptable (ordinary income vs capital gains gap smaller) - Monthly review: Recalculate Power Ranking for all traders
- Exit signal: If any trader drops below 0.2, reallocate
Example Portfolio: $10,000 Capital
| Trader | Score | Category | Holding Time | Trades/Week | Allocation | Amount |
|---|---|---|---|---|---|---|
| Trader Alpha | 1.42 | Tier 1 | 120 days | 0.4 | 30% | $3,000 |
| Trader Beta | 1.18 | Tier 1 | 45 days | 1.1 | 20% | $2,000 |
| Trader Gamma | 0.81 | Tier 2 | 21 days | 2.3 | 25% | $2,500 |
| Trader Delta | 0.67 | Tier 2 | 14 days | 3.2 | 15% | $1,500 |
| Trader Epsilon | 0.42 | Tier 3 | 8 days | 5.7 | 10% | $1,000 |
Why this mix: 50% high-confidence (score 1.0+), 40% solid performers (0.6-1.0), 10% diversification.
Tax Impact Analysis (37% Bracket)
Alpha + Beta (50% allocation): Long-term holdings = 20% capital gains tax
Gamma + Delta + Epsilon (50%): Short-term holdings = 37% ordinary income tax
Net result: Portfolio average ~28.5% tax rate vs 37% if all short-term. Saves $850 annually on $10k returns.
CopyTrader Proprietary Ranking Concept
This framework provides a quantitative approach to comparing eToro investors. It is not investment advice. Past performance does not indicate future results. Use Power Ranking as one tool among many for due diligence before copying traders.
Updated: December 2025
