These are the limitations to be aware of with a strategy:
- An investment cannot amount to more than the strategy equity multiplied by the Tolerance Factor within a strategy; more can be learned about this by following this link.
- The overall total equity limit of a strategy and all investments in it is USD 200 000.
These limitations inform us of what the maximum amount that can be invested in a strategy is.
Examples:
A strategy provider has their equity at USD 1 000 in a strategy, while the total equity (strategy provider’s equity + all other investors’ equity = total equity) of the strategy amounts to USD 50 000, with a strategy Tolerance Factor of 3.
- First check is strategy equity * 3 or USD 1 000 * 3 = USD 3 000.
- Second check is the overall total equity limit of a strategy - total strategy equity or USD 200 000 - USD 50 000 = USD 150 000.
The lowest of these, USD 3 000, is the max allowed investment.
Now, a different strategy provider has their equity at USD 1 000, but the total equity of the strategy is USD 198 000, with a strategy Tolerance Factor of 3.
- First check is strategy equity * 3 or USD 1000 * 3 = USD 3000.
- Second check is the overall total equity limit of a strategy - total strategy equity or USD 200 000 - USD 198 000 = USD 2 000.
The lowest of these, USD 2 000 is the max allowed investment.
Follow the link to find out more about what goes into a strategy.