- Investments
- Synchronous Trading
- How it Works
How does synchronous trading work?
Synchronous Trading is a copy trading solution which enables investors to copy the trades of experienced traders. Investors can employ their funds without being required to be able to make prompt decisions on their own, and execute individual trading transactions in the market manually, while traders may get extra income in the form of commission reward for successful trades that investors make based on the copying of the trader’s transactions.
| Investor | |
|---|---|
| 1 | Registers as an investor |
| 2 | Selects a trader from the rankings
|
| 3 | Links his/her account to a trader account |
| 4 | Gets financial results in proportion to the trader's yield |
| Trader | |
|---|---|
| 1 | Registers as a trader |
| 2 | Executes trading transactions by using own equity (the amount in the trader account must be at least $100) |
| 3 | Trades are copied to a respective investor account |
| 4 | Receives a commission reward based on the investor's profit |
How does an investor make money?
An Investor sets a specific ratio of trade-copying when linking his/her investor account to a trader account. The volume of a trading transaction on the investor account is calculated based on this ratio, and also the relation between the investor’s equity and trader’s equity.
**The equity includes own funds in the account balance..
Investor-Trader interaction
Let's say, an investor became interested in the trading track record and strategies of a certain trader, whose commission fee is 10%. The investor linked his/her investor account with the account balance of $10,000 to a respective trader account, and then set the copying ratio at 100%. The trader then opens a buy position of 0.5 lots in EUR/USD at the price of 1.12, with the amount of $5,000 in his/her trading account.
The trader closes the buy position of 0.5 lots in EUR/USD at 1.13 and locks in a profit of $500. In this case, the investor's profit is $1,000. The trader's reward of $100 (10% of the Investor's profit) is reserved in the commission retention account, and then it is distributed between the trader and investor during the settlement procedure.
5 000 USD
0,5 lots
10 000 USD
1 lot
5 500 USD
0,5 lots
11 000 USD
1 lot
5 600 USD
+ 100 USD
10 900 USD
+ 900 USD
- 100 USD
Settlement of commissions
Let's assume that an investor and trader have been collaborating for some time, and during that period the trader executed both profitable and loss-making trading transactions. Let's see below how the trader's and investor's amounts in equity were changing and how these amounts resulted in changes in the commission retention account.
| Transactions | TRADER | INVESTOR | BUFFER ACCOUNT | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Trader’s equity |
Volume, lots |
Profit Losses |
Investor's equity |
Volume, lots |
Profit Losses |
Commission on Profi |
Buffer Account Balance |
||
| 1 | 5 000.00 $ | 0.50 | 500.00 $ | 10 000.00 $ | 1.00 | 1 000.00 $ | 100.00 $ | 100.00 $ | |
| 2 | 5 500.00 $ | 0.30 | -300.00 $ | 10 900.00 $ | 0.59 | -590.00 $ | 0.00 $ | 100.00 $ | |
| 3 | 5 200.00 $ | 0.80 | 600.00 $ | 10 310.00 $ | 1.58 | 1 185.00 $ | 118.50 $ | 218.50 $ | |
| 4 | 5 800.00 $ | 1.00 | 800.00 $ | 11 376.50 $ | 1.96 | 1568.00 $ | 156.80 $ | 375.30 $ | |
| 5 | 6 600.00 $ | 1.30 | 1 000.00 $ | 12 787.70 $ | 2.51 | 1 930.77 $ | 193.08 $ | 568.38 $ | |
| 6 | 7 600.00 $ | 1.50 | -700.00$ | 14 525.39 $ | 2.86 | -1 334.67 $ | 0.00 $ | 568.38 $ | |
| 7 | 7 900.00 $ | 1.00 | -600.00$ | 13 190.73 $ | 1.91 | -1 146.00 $ | 0.00 $ | 568.38 $ | |
| 8 | 6 300.00 $ | 1.20 | 1 000.00$ | 12 044.73 $ | 2.29 | 1 908.33 $ | 190.83 $ | 759.21 $ | |
| 13 762.23 $ | |||||||||
During the settlement procedure, the investor's equity is $13,766.75, and the amount in the retention account is $760.77. The calculation is as follows:
The trader's reward is a part of the commission accrued in the retention account, which is due to the trader and calculated based on the trader's performance:
- the profit from all transactions in the investor account: $4,527.53
- the trader's reward (10%): $452.75
A commission refund to an investor is a part of commission accrued in the retention account, which is then refunded to a respective investor account:
- the refund to the Investor: $308.02
The total result of the investor and trader cooperating during the accounting period:
- equity in the investor account: $14,074.77
- the investor's profit: $4,074.77
- the trader's reward: $452.75
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