Beginners or Investors, who prefer to work with the cross-copying system, often ask themselves a question: "Which volume do I choose for copying the Trader's transactions?" If the Investor fails to choose the copying volume correctly, it may lead to unforeseen consequences and fall short of the Investor’s planned profit expectations.
CopyFX system offers Investors one of the most convenient tools to reduce risks – "Proportional" copying mode. The mode implies that the copying volume is calculated automatically, so the Investor don't need to distract himself from working to check settings all the time.
WHAT IS A "PROPORTIONAL" COPYING MODE?
"Proportional" copying mode operates almost on the same principle as the accounts synchronization functional of the MQL5 signals service. The copying volume for each new transaction is automatically defined by the system based on the information about the Equity on the Trader's and the Investor's accounts at the moment of copying.
This approach allows the Trader and the Investor to receive the equal percentage of profit after the position is closed. The most important thing is that if the result of the transaction is negative, the Investor won't lose more money than it was defined by the predicted level of risks as they are distributed based on the capabilities of both participants.
As a result, "Proportional" copying mode allows, first of all, to reduce the possible risks when copying, and secondly – to make the Investor’s work in the system easier and more convenient.
This copying mode is suitable for those Investors, who often change the amount of their own funds used for trading (deposit their accounts or withdraw funds from them), or for the Investors, who are subscribed to the Traders, who quite often do the same.
HOW DOES "PROPORTIONAL" COPYING MODE WORK
Let's move on to the numbers and examples. The formula used to calculate the amount to be copied in the proportional mode is very simple:
<The volume of Investor's transaction> =
<The Investor's Equity> / <The Trader's Equity> * <The volume of the copied transaction>
For example, the Trader's Equity at the moment of copying is 2,000 USD, the Investor's – 5,000 USD. The Trader opens a transaction of 1 lot. This transaction will be copied to the Investor's account in the following volume:
5,000 / 2,000 * 1 = 2.5 lots
This way, if the Trader earns 50% (+ 1,000 USD) in addition to his own funds, then the Investor will receive the equal profit of 50% to his funds, that is 2,500 USD.
Let’s continue. For example, the Trader decided to deposit his account with 8,000 USD, and the Investor, vice versa, decided to withdraw his funds and keep only 2,000 USD for trading. In this case, the transaction of 1 lot will be calculated as follows:
2,000 / 8,000 * 1 = 0.25 lots
Let's imagine that after closing the transaction, the Trader sustained a loss of 100 USD. In "Proportional" copying mode, your loss will be only 25 USD. This is the main feature of the mode: in the case the Trader trades unsuccessfully, the Investor’s losses will be limited according to the ratio he specified in the copying settings, thus the amount of the Investor's potential losses are limited.
But the opportunities of our new copying mode don't end here.
EXPANDED FEATURES OF "PROPORTIONAL" COPYING MODE
Using "Proportional" mode, the Investor can specify an additional multiplier (coefficient). Thanks to this feature, risks management for the copying trading strategy becomes more balanced and accurate.
The multiplier may be both increasing (for example, 1.5) and decreasing (0.5), but it can not take negative values. The size of coefficient, specified as the common fraction (for example, 9/7), is transformed into the decimal system, rounded to the hundredth (2 point after the decimal, 9/7 = 1.29).
What is the function of the multiplier?
Let's assume that you’re subscribed to the Trader, who trades with small volumes and uses very conservative strategy that produces not big but regular income. In "Proportional" mode, all you have to do is to set the increasing coefficient to "2" and the Trader’s transactions will be copied to your account at the doubled rate in comparison with what was calculated according to the formula. You risk more, but at the same time, you can earn more.
Or vice versa – when working with a "risky" Trader, you can set the decreasing multiplier for copying his transactions. But reducing your risks, you are also reducing your future profit.
In any case, you should always remember that the coefficient value for copying transactions in "Proportional" mode must match the goals and objectives that you set when creating your own trading strategy.
Today we’ve told you about "Proportional" copying mode, which can help CopyFX Investors not only to control the level of their risks in the system better, but to forget about the permanent calculations of the admissible volume for copying transactions as well. Use CopyFX, experiment, subscribe to Traders, even if you are only a beginner – now all of this can be done with less risk.