In Portfolio Copying, strategies are created by a Strategy Provider (SP). The SP’s trades are copied onto an investment through a process called copying which includes a copy ratio or copying coefficient calculation.
Find out what is a strategy and compare the differences between strategy and fund.
- Copy ratio
The copy ratio is the approximate ratio between the investment equity and the equity of the Strategy Provider (SP) within the strategy. It is used to multiply the lots assigned to orders while copying the orders.
The copy ratio (or copy coefficient) is designed to address how orders are copied onto the investment accounts when opening investments. The calculation is modified based on whether the strategy has open orders active or not at the moment the copying starts.
Note: Copy ratio or copy coefficient never increases after the start of investment regardless of any deposits/withdrawals on the strategy account.
Copy ratio (K) = equity investment / (equity strategy + sum (open orders spread cost))
- Equity strategy - strategy account equity
- Equity investment - investment account equity
- Open orders spread cost - strategy orders spread cost at the moment of the copy action. Current market prices are logged immediately upon initiation of the copy action.
When the strategy has no open orders open orders spread cost will be set as 0.
Let us look at a few scenarios an Investor may encounter:
Start copying without open trades:
A strategy has started and does not have any open trades at that point in time. Once it starts, the system calculates a copying coefficient. When the SP opens a trade, the trade is immediately copied to the investment account at the same opening price.
Start copying with open trades:
A strategy has started and has a few open trades at this point in time. Once it begins, the system calculates a copying coefficient. In this case, the copying coefficient is calculated differently because it also includes the spread cost of the SP’s open trades.
Trades already open are copied to the investment account.
- If the market is open, orders will be copied with the current market price which may be different from the opening price of the trades on the SP’s side.
- If the market is closed, and there are more than 3 hours until the market re-opening for the instruments on which there are existing open trades, orders will be copied onto the investment using the last market price.
- If there are less than 3 hours to market re-opening for the instruments on which there are existing open trades, the Investor will not be able to start copying. Copying will be available once the market is open.
Subsequent copying after opening an investment
When the SP opens new trades, they will be immediately copied to the investment account using the same opening price as that of the SP. The copying coefficient used for calculation is the actual copying coefficient, calculated and updated according to the copy ratio formula.
Let’s take a look at an example to illustrate how copying and copy ratio (copying coefficient) works:
A Strategy Provider has USD 500 in a trading account.
- Investor 1 invests USD 1 000
- Investor 2 invests USD 1 500
Copy ratio (K) = equity investment / (equity strategy + sum (open_orders_spread_cost))
|USD 1 000
|(1 000/500) = 2
|USD 1 500
|(1 500/500) = 3
If the SP opens an order of 2 lots, let us calculate how it will be copied to each investment:
|2 x 2 lots = 4 lots
|3 x 2 lots = 6 lots
Important: In scenarios when a copy ratio is recalculated, the maximum copy ratio is set at 14.