Passive investment, or social trading, is one of the fastest-growing trading approaches today. It takes influences from the social media networking model and applies them to investment, driving new growth for a rising number of brokers. Two styles have emerged as the strongest contenders; percentage allocation management module (PAMM), which gives professional money managers access to traders through a broker, and social copy trading systems like cTrader Copy, which enhances existing models like PAMM, bringing them closer to elements of social networking like sharing know-how and spreading information quickly.
As popular as PAMM is with traders and brokers, this new model in the copy trading space is set to challenge and evolve the existing passive investment paradigm, making it more versatile and transparent. Spotware’s cTrader Copy allows any trader to become a Strategy Provider and share their trading strategies while charging fees to their followers. Investors can easily copy and learn from their trading. It adds checks and balances to the PAMM system, putting traders and brokers more in control over their social trading.
How It Works
In cTrader Copy, traders can choose from a wide pool of strategies to invest in. The Strategy Provider trades his own funds and charges fees for allowing an investor to copy his strategy. All trades done by Strategy Provider are copied by Investors based on equity to equity model. The equity to equity model means that the trades volume that will be copied is defined according to the ratio of Investor’s equity to Strategy Provider’s equity. Based on this, the investor gets his returns less the fees set by the Strategy Provider.
Example: Investor has a starting balance of $5000. He starts copying a selected strategy according to equity to equity ratio. The Strategy Provider’s performance fee for copying this strategy is 10% of Investor’s Profit. Strategy Provider makes some successful trades and Investor gets a profit of $2500 from copying his strategy. So, Investor’s return will be calculated as follows: the starting balance of $5000 plus the profit of 2500 USD less 250 USD (10% fee) equals to $7250.
PAMM versus cTrader Copy
Both systems are used by investors who don’t have enough experience or time to trade for themselves and prefer to copy successful trading strategies. In addition, cTrader Copy and PAMM both provide performance fees.
Moreover, unlike most other copy trading programs, cTrader Copy provides management and volume-based fees as well. Strategy providers can choose to charge either of the fees type or a combination of them.
There are additional benefits to cTrader Copy. It’s designed to be more flexible and accessible.
For example, investors are in full control of their funds at all times. Equity can be increased at will to take advantage of higher-return opportunities, or reduced when capital is needed to pursue other strategies. Ongoing profits can be withdrawn while keeping the initial capital invested.
Another attractive feature of cTrader Copy is that, instead of facing the difficult and lengthy withdrawals usually associated with PAMM, cTrader Copy investors can easily increase or decrease funds allocated to a particular strategy.
Cross-Broker Feature Increases Trader Pool
There are other compelling differences making cTrader Copy a competitive substitute or alternative to PAMM. Rather than being tied to one broker, cTrader Copy offers a wealth of strategies with its cross-broker integration capability, increasing access to successful trading ideas. In the cross-broker option, fund allocations become more liquid, drawing on many sources instead of just one and reducing the role volume plays in the investment strategy. Alternatively, the broker can choose to be exclusive if it so chooses. Either way, the new fintech gives brokers and traders much more choice in terms of strategies and liquidity.
Less Pressure, More Networking
cTrader Copy takes social trading to a higher level of sophistication and ease. Instead of suffering the psychological pressure, legal complications and potential anxiety related to directly managing other people’s money, Strategy Providers only have to concern themselves about trading their own funds. The system does the rest, faithfully and reliably copying their trading moves to their followers, who can choose to adopt or abandon them without extensive paperwork, allowing for more flexibility during market volatility.
Risk Management
cTrader Copy has a clear advantage over other passive investment systems when it comes to risk management. In volatile times, even the best trading strategy can have unexpected and sometimes unwanted results. This is, after all, the post-millennial economy of trade wars, rising interest rates, and Brexit. The investment environment can become unpredictable overnight.
Instead of being locked into an undesirable or unwanted direction, with cTrader Copy, investors gain from increased flexibility and the ability to react quickly by changing strategies or equity levels. In a world where geopolitics or macro-economic change constantly and influence asset prices, investors have the additional security of knowing cTrader Copy frees up their decision-making powers quickly and effortlessly. This kind of direct control also improves an investor’s ability to judge for themselves, providing a type of valuable, real-life experience which – over time – could elevate them to the status of the Strategy Provider.
In the final analysis, cTrader Copy brings much-needed features to the social trading model, making it a strong candidate for brokers and traders seeking an improved investment experience.