When you look at your Napbots dashboard, there is one metric you can’t miss: performance. Expressed as a percentage, it indicates the return of your trades over time. But what is a “good” performance? While there is no single answer to that question, this article will provide you with tools to better understand the performance of your strategies.
Mastering Performance Indicators
At its simplest, return on investment simply means the money made or lost on an investment. It can be measured nominally (in euros or dollars) as the value of the underlying asset changes. For example, if you buy a crypto worth $100 on day 1, and it’s worth $110 on day 2, you have a $10 return.
However, using a ratio to convey return is the best way to go, as it gives you an idea of performance regardless of the nominal value of invested sums. In the above example, performance = profit / investment = 10 / 100. Put in percentage, that’s 10%.
In trading, timing is key. Usually, performance is not calculated at a random moment in time, but over specific periods: hourly, daily, monthly, quarterly, yearly. Year-on-year (YoY) return compares the value of an asset with its price one year ago. If you hold an asset for a longer time period, you will then want to calculate the average annual return over time of your investment.Another useful term you might want to be familiar with is the Sharpe ratio. Named after Nobel laureate William F. Sharpe, it is used to integrate risk into returns. Here is the (simplified) way to calculate it: return / volatility. As a general rule, the higher the Sharpe ratio, the better the strategy, as you achieve better return with less risk.
How Do You Create Performance?
All traders want to achieve some sort of return. After all, if you invest your money somewhere, you want to make a profit, not a loss. But trading comes with risks. To make a profit on markets, you need to catch the trends ahead of their time. This means buying a crypto at $100 because, based on your market analysis, you think its value will rise. If it trades at $200 on the following day (and you decide to sell it) you have doubled your investment. Instead, if it trades at $10, you have a negative return of –90%.
This is why strict stop-loss orders are important. These orders instruct to sell an asset as soon as its price falls below a specified value. In our example above, if the trader had set a stop-loss order at 10% below the purchase price, the crypto would have been sold at $90, curtailing their loss.
How Does Napbots Track Performance?
Your Napbots dashboard tracks performance in real time. Let’s break its components down.
- Performance: You can check your all-time performance (starting from the moment you first used Napbots) or your performance for the past 24 hours / 7 days.
- Allocated Funds: The amount you have dedicated to trading using your strategies.
- Net P&L: P&L means Profit and Loss. It summarizes revenues and expenses for a given time period. The P&L is equal to the gain (or loss) made by the strategies, minus the costs, which are the trading fees associated with each exchange and slippage (the difference between the expected price of an order and the price when the order actually executes). Please note that your Napbots subscription fee (€2 each month per $100 allocated, capped at €500 for allocations over $25, 000) are not included in the P&L calculation.
- Position size: The amount currently being traded in the strategies.
- Unrealized P&L : This shows the gain (or loss) you are expected to make from open positions.
Interested in seeing returns for each crypto bot, let’s say the Wise SOL strategy? You can do that in the “Wallet” tab.
Source : Napbots Coinshares – past performance are not a reliable indicator for future performance.
This “ID card” for each bot gives more information on the performance of each strategy.
- P&L (%) 1Y: This is the yearly Profit & Loss of the strategy for the past year, expressed in percentage. The P&L does not take Napbots fees into account.
- Lookback period: It refers to the minimum time-period needed to analyze the strategy.
- Maximum drawdown: MDD charts the maximum loss from a peak to a low over a given time period. It measures the largest loss, but it does not indicate how often these “drops” occur, or how long it takes for the assets to recover to their peak – if they recover.
- Profits: The total profit (in dollar) made by the Wise SOL bot. This is calculated over a one year rolling period, stopping the previous day on the UTC time zone, and using Cryptocompare to source prices. This is a gross performance that does not include trading fees or slippage.
You can dive even deeper by checking the advanced statistics:
- Turnover ratio: It’s the percentage of holdings that have been replaced in a given year. The higher the turnover ratio, the more active the strategy is.
- Ratio Win/Loss: This ratio represents the strategy’s number of winning trades relative to the number of losing trades.
- Avg. Trades duration: How long positions stayed open, on average.
Comparing the Performance of Your Crypto Bots to Their Underlying Assets
Now you know how your strategies performed – if they made a profit or a loss. To take the analysis further, it’s necessary to compare their performance with their underlying asset. The strategy only makes sense in a wider market context: suppose a strategy attained a 20% return. Seen in isolation, that might look good. But if the underlying asset’s price rose by 50% over the same time period, the strategy actually underperformed. Conversely, if a strategy has a negative return, it might be because the underlying asset is in a downward trend.
The Wise: SOL bot trades on SOL, Solana’s blockchain native asset. You’ll want to know how well the strategy performed related to SOL’s price. To do so, you can check historical data on websites such as CoinMarketCap or CoinGecko. They track crypto prices in real time, and provide information on their popularity and traction. The Napbots team is currently working on integrating this comparison directly to your dashboard.
The bot outperformed its underlying asset , but keep in mind that past performance is no guarantee of future results and that crypto is volatile. Our strategies do not guarantee future positive performance.
You can also compare the return of your portfolio to a benchmark, such as the stock index or bitcoin.
Ready to analyze your own algorithmic crypto strategy instead of a generic example? Create an account on Napbots, choose a strategy and allocate the funds whose return you will be able to track in real time.