More Details regarding Traders Combos!!!
Now that you have read the new amazing service that ZuluTrade offers to its clients, it is time to go into further detail about the way Traders’ Combos work.
On the Traders Portfolio Set Up window (see the image below) , you will be asked to specify some important elements that will help us find and display the Combos that most suit your criteria.
Funds you want to invest
This is the amount you wish to invest on Traders Combos.
It will be automatically allocated to the Traders included, based on your risk appetite.
It cannot exceed your maximum amount, as calculated based on your current balance, your ZuluGuard settings and your PnL.
Case 1 - I have no Traders added, my portfolio is empty.
If you do not have other Traders in your Portfolio, then you may select investment account that equals the balance of your account.
Ex: If your balance is $1,000, you may invest up to $1,000 on Trader Combos.
Case 2 - I am already following Traders with ZuluGuard activated *.
If you have already set up a Traders’ portfolio and ZuluGuard has been enabled, then the maximum amount you can select to invest on Traders’ Combos equals the balance of your account minus the sum of the overall ZuluGuard amount already allocated to the Traders you are following.
*Please note that ZuluGuard is mandatory for European Clients.
Case 3 - I am already following Traders with ZuluGuard activated **
If you have already set up a Traders’ portfolio but ZuluGuard has not been enabled, then the maximum amount you can select to invest on Traders’ Combos equals the balance of your account minus the sum of the overall virtual ZuluGuard amount.
**Please note that ZuluGuard is not mandatory for non European Clients.
How is Virtual ZuluGuard Amount calculated?
|Trader’s PnL is positive||Virtual ZuluGuard is valid|
|Trader’s PnL is negative AND below its virtual ZuluGuard||Virtual ZuluGuard is valid|
|Trader’s PnL is negative AND above its virtual ZuluGuard||As Virtual ZuluGuard we consider the PnL amount|
This is the risk you wish to take for your investment.
Taken your preference into account, the system will display Combos based on the NME of the Traders included in the Combos as well as the probability that the amount to be invested will suffice for future performance.
The Risk Appetite is negatively correlated with Traders’ NME structure. This basically means:
Why is that?
Studying the historical NME of the Traders, we have noticed that:
The higher the selected timeframe, the higher the NME.
We have also noticed that there is a minimum 30% deviation of the NME with the previously registered one.
Ex: 3 months NME is lower by 30% than the 6 months NME of the same Trader, and also, 6 months NME is 30% higher than the 3 months registered NME of the same Trader etc.
What are the NME Timeframes of a Trader?
The Necessary Minimum Equity (NME) is an indication of the amount that an Investor trading with 100:1 leverage should have to receive all the positions of this Trader with 1 micro lot each.
The timeframes are: 3 Months - 6 Months - Yearly & Overall .
We have categorized the Risk appetite according to sum of the NME of all Traders included in the Trader’s Combo. This basically means that:
|Risk Appetite||NME of the Traders’ Combo taken into account|
|Conservative||Overall Traders Combo NME|
|Moderate||Yearly Traders Combo NME|
|Aggressive||6 months Traders Combo NME|
|Highly Aggressive||3 months Traders Combo NME|
Why do we consider less risky a high NME (e.g. yearly vs 3 months)?
When the trading history of the Traders included in the Combos is short, it means that their trading strategy has not been tested across different market conditions.
By default, the NME is usually smaller which gives two possibilities to the Investors:
Case 1 - Investors with modest capital
The Investors will be able to follow the Traders’ Combos, but they need to pay attention to the risk they are undertaking.
Case 2 - Investors with medium or high capital
The Investors will be able to follow the Traders’ Combos with significant lot size, but they will need to avoid overexposure.
How does the system automatically allocate the lots per Trader?
The lot allocation per Trader is also negatively correlated with Traders’ NME timeframe.
Let us see that with a practical example!
An Investor wishes to invest $1,000 on Traders’ Combos, with a Conservative risk appetite.
Search for Traders’ Combos matching the selected criteria
Based on his/her preferences, the System will track Traders’ Combos based on the overall NME of all the Traders concerned.
In this case above, the Traders’ Combo’s NME will be $900.
This Combo will be displayed and the Investor will be able to add it in his/her portfolio.
Allocation of lots for Trader X and Trader Y
Based on the rule as explained above, “Higher timeframe of the NME → Smaller lot size per Trader”, we will select the smaller lot size per Trader, as the risk appetite of the Investor is Conservative, thus the NME data calculated are based on the overall NME of each Trader.
Trader X: 1 micro lot
Trader Y : 1 micro lot
Allocation of ZuluGuard per Trader
The amount that will be allocated per Trader will be always a little bit bigger than the NME of each Trader and calculated based on a weighted average formula.
Trader X: $495
Trader Y: $495
Having read this post, you are now ready to select your Traders’ Combos!
Let us give you some tips that will be of assistance to you!
This time our Investor wishes to invest $1,000 on Traders’ Combos, with a Moderate risk appetite.
Based on his/her preferences, the System will track Traders’ Combos based on the yearly NME of all the Traders concerned.
What happens next is:
The system will scan all Traders included in each Traders’ Combo and will lock at the Yearly NME for each Trader.
The system will calculate the sum of the NME of each available Combo (based on the sum of all Traders yearly NME).
The system will compare the Traders’ Combo’s NME across the selection of the Investor regarding the selected investment funds, in our example $1,000.
- If the selected investment funds are above the NME of the Traders’ Combos, then the Combos will be displayed.
- If the selected investment funds are below the NME of the Traders’ Combo, then the Combos will not be displayed, due to insufficient investment funds.
Back to our example. Let us say that the Investor is able to view 3 Traders’ Combos.
Traders’ Combo X (Total NME $300)
Trader’s Combo Y (Total NME $500)
Traders’ Combo Z (Total NME $400)
Total NME of Traders’ Combos X, Y and Z = $1,100
The investor is able to pick multiple Traders’ Combos.
However in our example, the Investor will not be able to follow all of 3 of them because the total NME of the Combos exceeds his selected investment capital:
Investor’s Funds: $1,000 < Total NME of Combos $1,100.