Like any fund manager we judge your performance on percentage return. However where we differ is that we also measure how your stock selections have performed relative to the market as a whole.
When markets are rising, most stocks rise too, so it’s not difficult to pick stocks that will rise in value, and when markets fall, most stocks fall too, so again it not difficult to pick stocks that will fall in value.
What we are looking for is people that can pick stocks that outperform the market, regardless of the direction of the market.
When you enter into a position on our system, we log where the Index is at that moment in time. When you exit that position we also log where the index is at that moment in time.
This enables us to calculate your performance on each individual trade relative to the market.
You buy Microsoft at $50 and sell at $55, so you make 10%
During the same time period the S&P 500 rose by 5%
So your P/L is 10% on the trade and 5% relative to the market
Had the S&P fallen during the same period by 5%, your P/L would have been 10% on the trade and 15% relative to the market.