I’ve noticed that just in the first week of migrating my strategy here to ZuluTrade that I have 4 trade copiers who are on a Demo Account and some others with very low equity. I’ve also noticed some other unique areas on ZuluTrade that I need to clarify.
Where do we select our compensation structure, or is this something strategy providers do not have to select? I see “get paid by commission” and “get paid by performance fee” in my profile but I’m not sure who controls this (investors only, providers only, or Zulu)
What is Reserve Ratio? I’m assuming Zulu holds a certain amount of our performance fees for some reason. For how long? Does this percentage always remain the same? How is the reserve handled from month to month?
Is there a way we as providers can set a “minimum equity required to follow” our strategies? Letting Demo Accounts or Very Low Equity Accounts follow our strategies gives us potentially very little compensation for our performance AND a huge potential profits and nominal gains for Followers and Copiers. Some trade copiers can use this small / Demo Account to then RE-COPY to another MT4 trading account of their own or of other investors without compensating the provider or giving permission for this “on-selling” / “on-copying”
In you last bullet point there is every chance this is happening, as long as an account holder has money in the account the signals can be signed up to, not sure but also a demo account can be held indefinitely for a live account holder, if there are ways around it, it will be found.
A good provider can make the user great profit while the provider has to rely on a mass influx of users to make their efforts of some value.
There should be “minimum required capital” to follow option which would be set by the provider.
That way excellent traders can protect their valuable intellectual property from being mis-used.
Currently, a Trader’s compensation model is selected by each investor. An investor selects how he compensates a Trader, as a result, some investors use the volume based compensation model while others use the profit sharing compensation model. Naturally they have the ability to have both models in two different accounts.
(We are copying the explanation fro our trader guide)
Traders get compensated on a monthly basis according to the profits they generate on their Real Investors under Profit Sharing Account Model
Every time you generate a profitable monthly PnL to a Profit-Sharing Investor, you will be credited a 20% Performance Fee. This Fee will only apply for the amount above High Water Mark (“HWM”). HWM is the maximum profit made by the Trader and it is calculated on the 1st calendar day of each month since the Investor added the Trader to his portfolio.
For each profitable monthly PnL, the Trader will be compensated based on a 50% Payment-Reserve model. More specifically:
• 50% of the Performance Fee charged is being credited in the Trader’s account
• The same amount (50%) is requested from Reserve bucket. The amount that will be released and credited is limited to the reserved amount generated from previous periods.
• 50% of the Performance Fee charged is added to the Trader’s Reserve Bucket for next periods.
Each Trader holds one Reserve Bucket for all his Profit Sharing Investors. The Reserve amount is updated on the 1st calendar day of each month based on the profits/losses generated on the Real Investor accounts from the Trader during the previous month.
Case 1: Profitable monthly PnL - Profit above HWM
Investor’s Monthly Performance Fee (20% of the Profit above High Water Mark) is split, as follows:
i. 50% is credited in the Trader’s account
ii. 50% is credited from Reserve Bucket (if applicable - see the example below)
iii. 50% is placed into the Trader’s Reserve Bucket for future release.
Case 2: Negative monthly PnL
In case of underperforming, the Reserve amount will be deducted by 20% of the generated losses.
Case3: Recovering Losses Period - Profit below HWM
In case of a Recovering Losses Period, the Performance Fee will not apply, yet the Trader’s reserve will be increased by 20% of the generated Profit.
In June, a Trader makes a profit of $1000 - This will be the HWM. The Investor will be charged 20% out of the accumulated profit ($1000): $1000 x 20% = $200
Based on the Payment-Reserve Scheme, for the Trader
• 50% of the Performance Fee paid by the Investor will be credited in the Trader’s account immediately: $200 x 50% = $100.
• 50% of the Performance Fee paid by the Investor will be credited in the Trader’s account from the Reserve (in case there is available amount). In this example, there is no Reserve.
• 50% of the Performance Fee paid by the Investor will be reserved in the Trader’s Reserve Bucket: $200 x 50% = $100.
Total Performance Fee: $100
Total Reserve Amount = $100
In July, the Trader has a negative month (-$100) – HWM remains $1000.
• Performance Fee will not apply for the Investor
• The Trader’s Reserve amount will be deducted by 20% of the losing amount: -$100 x 20% = -$20.
Monthly Performance Fee: $0
Total Performance Fee: $100
Monthly Reserve Amount = -$20
New Total Reserve Amount = $80 (=$100 - $20)
In August, the Trader makes a profit of $500 – New HWM $1400
• The first $100 is considered as Recovering Losses Amount (loss generated in July) and the Investor will not be charged any Performance Fee. However, the Trader’s Reserve amount will be refilled again with the amount of $20 (20% x $100).
• Performance Fee will apply for the Investor, only for the $400 (amount above new HWM): $400 x 20% = $80.
The Trader will now receive
o 50% of the Investors’ Performance Fee will be credited immediately: $80 x 50% = $40.
o 50% of the Investors’ Performance Fee will be credited from Total Reserve Amount reserved so far: $80 x 50% = $40
o 50% of the Investors’ Performance Fee will be added to Reserve Bucket: $80 x 50% = $40.
Monthly Performance Fee: $40
Total Performance Fee: $180 [$100 (old fee) +$40 (new fee) +$40 (from reserve bucket)]
Monthly Reserve Amount = +$20 (from Recovering Loss Period) -$40 (credited to Trader from Reserve) + $40 (credited to Reserve bucket) = $20
New Total Reserve Amount = $100 (=$80 + $20)
Currently, it is not possible to set a “minimum equity required to follow”. However, we are always taking into consideration our Traders’ proposals. Having already received similar proposals, we consider to implement such a feature in near future hopefully.Naturally Trader are able to use the Recommended Settings to help Investors how they should follow them.