Commission is set by strategy providers as a fee that investors must pay when they make profits.
Commission calculation
Strategy commission is calculated at the end of trading period or when an investor stops copying as follows:
Investment_Commission (USD) = (Equity+sum(Paid_Commission) - Invested_amount) * %commission - sum(Paid_Commission)
Let’s break down this down further to better understand the calculation:
- Equity = current investment Equity
- sum(Paid_Commission) = total paid commission till date for the particular investment
- Invested_amount = Investment’s starting balance
- %commission = Commission rate set by the strategy provider at the time of investment opening
While the commission rate for a strategy can be modified by a strategy provider, the new rate is only applicable for new investments; investments already created will not be changed.
Let us look at an example:
- Investment’s starting balance (invested_amount) = USD 1 000.
- Assume the strategy provider’s commission is set at 10%.
- Profits made at the end of trading period = USD 2 000
- Current investment equity at the end of trading period (Equity) = USD 3 000
Calculated commission = (Equity + sum(Paid_Commission) - Invested_amount) * %commission - sum(Paid_Commission)
= (3000 + 0 - 1000) * 10% - 0
= 2000 * 10%
= USD 200
The result is that the strategy provider will be paid USD 200 as commission. The investment’s updated balance at the end of the trading period will be USD 2 800 (3 000 - 200).
Commission calculation scenarios
Commission calculations can occur under 2 scenarios: the general scenario and the early investment closure scenario. Each scenario follows a distinct set of processes that we will share in detail below.
General scenario:
If the investor continues to keep their investment active until the end of a trading period:
- The strategy provider’s orders remain unaffected.
- All copied orders are closed and reopened with the same price (zero spread).
- Profits from the copied strategy and its equity are used to calculate the commission.
- Commission is deducted from the investment account.
- Calculated commission is credited to the strategy provider’s Social Trading commission account in the Personal Area (PA).
Early investment closure:
If the investor decides to close their investment account before the end of the trading period:
- All copied orders are closed at the current market price.
- Profits from the copied strategy and its equity are used to calculate the commission.
- Commission is deducted from the investment account.
- Calculated commission is credited to the strategy provider’s Social Trading commission account (in their PA), at the end of the trading period.
Details of commission calculated and paid per investment are available in the Commission Report found for each strategy in the strategy provider’s PA.