Do you want to find out how a ZuluTrade Profit Sharing account works?
Do you want to understand the pros and cons of choosing this mode?
We can answer all your questions on ZuluTrade’s Profit Sharing.
You can even try it out with a Demo account. If you already have an account, just open a new demo account from the link below:
What is ZuluTrade Profit Sharing
ZuluTrade Profit Sharing is the new compensation mode for Signal Providers.
In other words, this is a new method used to pay traders who generate signals that are then copied automatically by followers.
This new model aims to:
- improve the relationship between traders and followers
- hold traders responsible, making for safer and more secure trading investments
- further shift the trader’s focus on growing his followers
How ZuluTrade Profit Sharing Works – ZuluTrade Classic VS Profit Sharing
With ZuluTrade’s Profit Sharing model, the trader earns 20% of the profits he has generated for his follower’s account every month.
From the other side, the follower pays the trader 20% of the profits he has gained thanks to that trader, every month.
The Follower gets a discount on the spread paid for each replicated operation. ZuluTrade reports a lower fee for this model, from around 2 pips to 1.5 per transaction.
The 20% of profits of the trader is paid on a 50% Payment-Reserve model.
The 20% Performance Fee is paid on a High Water Mark basis, therefore only for months closed with profits, if the profit has exceeded the last High Water Mark that had been reached.
In case a month is closed at a loss, 20% of the loss is deducted as a penalty to the trader from the Reserve.
Don’t worry, we’ll explain everything in detail.
What does High Water Mark mean?
Using the High Water Mark clause, the performance fee the Trader can charge to the followers is calculated not just taking the positive returns into account, but also considering any previous losses.
The highest return ever achieved by the trader is the High Water Mark.
Over the following months, the trader will earn his 20% commissions only if he has produced a higher performance than that previous milestone. At that point, the new High Water Mark will become the new milestone, and so on.
For further information read this article.
What are the differences from the classic model?
ZuluTrade’s classic compensation model (which is still available) is based on the volume of operations replicated by the follower.
The trader profits 0.5 pips for each operation replicated by the follower.
If the follower replicates an operation on EURUSD with 1 lot, the trader earns $5 (0.5 pips).
The follower DOES NOT pay performance fees to the trader at the end of the month.
On the other hand, the spread paid by the follower for each transaction is slightly higher.
Who chooses whether to use ZuluTrade Profit Sharing?
The decision to use the Classic Compensation Model or Profit Sharing is up to the Follower.
Users choose the compensation mode when creating the ZuluTrade live account, and it cannot be changed (you cannot switch from Classic to Profit Sharing or vice versa).
If you wish to change the model, you can open a new account (still using the same registration account) and choose the Classic Model.
What are the changes that affect FOLLOWERS with ZuluTrade Profit Sharing?
ZuluTrade’s Profit Sharing mode is an improvement that definitely favours followers.
The classic compensation mode ensures Traders earn from opening and closing operations, regardless whether those trades have generated a profit or a loss.
This is why there are many Traders/Signal Providers who use risky and fast day-trading techniques (almost similar to scalping), just to generate higher commissions and earn more from followers.
However, ZuluTrade Profit Sharing is completely different.
First of all, the Follower chooses how to pay the Trader, not the other way around.
Secondly, the trader can only earn if he has really made a profit for its followers.
All of this is pushing, and will keep pushing, traders to operate securely, with real tested strategies that return profits over time.
What are the changes that affect TRADERS with ZuluTrade Profit Sharing?
Traders get some benefits from this mode as well.
One of the most notable benefits is that followers who choose to use the Profit Sharing model cannot interfere with signal replication.
The Classic compensation model provided followers with several ways to change the way traders’ strategy were replicated on their account (Fixed or Pro-Rata ZuluTrade mode, allowed trading assets, maximum lots, etc).
However, the Profit Sharing mode leaves few choices available.
Followers can only use the Pro Rata ZuluTrade Allocation feature. This means traders become actual money managers, and they can effectively apply advanced money management strategies, being sure that these strategies are replicated precisely on the followers’ accounts.
How the 50% Payment-Reserve model works with ZuluTrade Profit Sharing
If the trader generates a higher profit than the last High Water Mark, he is entitled to 20% of the profit obtained thanks to him from every follower.
The 50% Payment-Reserve rule explains how this 20% is paid and where the money comes from.
From the follower’s side, 20% of the profits of the month will be deducted. And that’s it for the follower.
The trader, however, is a bit more complex.
First of all, we should mention that every Trader has a Reserve for all his Followers with Profit-Sharing accounts.
The 20% commission is split in half:
- 50% is immediately paid to the trader on his account
- 50% is deposited into the Reserve Fund
Now, the trader has received 10% of the commission (20% – 50%). The other 10% is paid by taking money every month from the Reserve Fund, if available.
As you can imagine, in the first month (if there were any profits), the reserve fund won’t have enough money to pay the total commission.
For an actual example of how this model works, please check the ZuluTrade Trader Guide.
Are There Any Penalties in Case a Month Is Closed at a Loss?
Yes, ZuluTrade applies a small monetary penalty.
A sum amounting to 20% of the losses accrued by the trader is deducted from the Reserve Fund.
Summarizing Conditions for ZuluTrade Profit Sharing
- Traders receive a reward amounting to 20% of the profits generated for the follower
- The spread paid by followers on operations is reduced
- The 20% commission is paid only if a month is closed with profits, on a High Water Mark model
- The trader earns a 20% commission for his performance on a 50% Payment-Reserve model