A strategy’s tolerance factor refers to the limit placed on the maximum amount of investment. This feature acts as a safety mechanism, protecting both investors and strategy providers, and is calculated by the formula:
Maximum amount for an investment = strategy equity * tolerance factor
Calculating the tolerance factor:
The tolerance factor is a dynamic limit, weighted by the following:
- Strategy age: A strategy account's weight increases by 1 for every 30-day period following the placement of its first order.
- When calculating a strategy's age before a month's end, the age is expressed as a fraction out of 30. For instance, if the calculation occurs on the 15th, the strategy's age weight is 15/30, which equals 0.5. This value is then rounded down to 0.
- In the case of stop-out, the age is reset to 0.
- Strategy provider’s verification status:
- If fully verified = 2
- If not fully verified = 0.5
Note: The maximum tolerance factor is set at 14.
Example:
Let’s calculate the tolerance factor of a strategy where the first order was opened 90 days ago, and the strategy provider is fully verified.
- Strategy age = 90/30 = 3
- KYC status weight = 2
- Tolerance factor = 3 + 2 = 5
If the strategy faces a stopout after 90 days, its age is set to 0, and it is hidden.
- Tolerance factor = 0 + 2 = 0
Once a strategy is hidden due to stopout, investors can still invest in it through direct links provided by strategy providers.
If a new order is opened on the strategy later, the age counter is reset.
On the 10th day after the order is opened, the strategy age is calculated as
- Strategy age = 10/30 = 0.33 = 0 (rounded down)
- Tolerance factor = 0 + 2 = 2
Calculating the maximum amount of investment
Let’s calculate the maximum investment amount for a strategy with an equity of 10,000 USD and a tolerance factor of 5.
Therefore, the maximum amount that can be invested = 10,000 USD * 5 = 50,000 USD
Note: A strategy’s total investment amount limit is set at 500,000 USD.