Review of ZuluTrade Account & Risk Management features
ZuluTrade Review: Account & Risk Management
Under “My Account” you’ll find all the ZuluTrade user interface screens to manage your account settings, show open and pending trades, as well as view your account trading history.
Your account settings will determine how your funds are allocated and how much risk you’re taking (please note that the settings tab is only visible after you move the mode slider to advanced). At a global level, the interface lets you set the lot size of your account and total maximum of open lots (SEE IMAGE).
Once you’ve selected the Trader (aka “signal providers”) you want to follow, you have to allocate how much you want to risk on each signal from the provider. ZuluTrade allows you to allocate risk in “Custom Mode” or “Auto Mode”.
In “Custom Mode”, you have to enter the number of lots you want to trade for each signal per Trader. You can minimise risk by specifying the maximum number of trades or lots the provider can open for you at a single time, as well as set your own stop (or limit) level for each trade. You can even set all these parameters per currency pair for the “signal provider” (e.g. if you only want to take their EURUSD trades or allow them to take more risk on a specific pair). You can also use the time filter in case you only want to take a trader’s signals at specific days or hour intervals (e.g. if you only want to take trades when you are online yourself). In case you want to take control yourself of any open trades the Trader has in your account, you can lock them, so their signals will not be taken when they try to close them.
There’s also the unique ZuluTrade option to reverse any signal received by the provider (i.e. if they buy, in your account it will sell). However, it’s not clear why you would purposely try and go against a Trader since in normal circumstances they’re still trying to make a profit (even though they may not always achieve this in reality).
To help you evaluate how these settings impact your overall account risk, ZuluTrade use a “Margin Call-o-Meter”. This is based on the concept that when you get a “margin call” it means you don’t have enough funds to cover the open positions in your account. This indicator shows how high the chance is that you’ll get a margin call (i.e. your account will be blown) based on the historical performance of the “signal provider” and the settings you entered.
While the introduction of the “Margin Call-o-meter” by ZuluTrade is certainly useful, it also has some drawbacks. It’s based on historical data and normally works of the highest drawdown of the Trader in the past. However, for many traders the historical data doesn’t stretch long enough yet to ensure this historical figure is even close to being accurate. Also, for any Trader who changed their strategy in the past, the meter will not show the current up-to-date risk profile.
In December 2012, ZuluTrade introduced the ZuluGuard feature to help you protect your account against unwanted behaviour from traders you follow. It allows you to define the maximum capital loss, maximum single trade drawdown and maximum open trades you allow for each “signal provider” before the ZuluTrade system will automatically take some action. The actions you can request when a trader reaches one of those limits are to:
- close all open trades from this “signal provider” in your account
- stop following this “signal provider” (i.e. don’t open any new trades)
- stop following this trader and replace them with a similar or higher ZuluRanked trader
Please note that since December 2th 2014 all EU resident need to protect each Trader in your portfolio with the ZuluGuard Capital Protection. This rule with introduced in accordance to EU legislation with the aiming to reduce systemic risk and increase investor protection. The maximum accumulated Capital Protection for all Traders across the entire portfolio also cannot exceed the overall risk allowance for EU residents (no more than 75% of your available balance).
When using the “Auto Mode” to set the amount invested per “signal provider”, the ZuluTrade trading platform will use the historical data to allocate your funds based on the risk you want to take for your account. While this is a useful tool, it’s again very much dependent on the amount of data available for the “signal provider” and the consistency (past and future) of the provider. As soon as they would change their strategy, i.e. open significantly more trades at the same time or increase their stop levels, the “auto allocation” would become flawed.
When allocating the risk to your account, the ZuluTrade social trading platform also allows you to “Simulate” run a “Backtest” against the settings you’re planning to use. I.e. you can view how your account would have performed with your starting balance and settings. As always, historical data is absolutely no guarantee of future performance and it’s very easy to get a high ROI of historical data.
However, this tool is very useful for users who like to use their own stop or limit level. This would be done to protect your account and Trader activity against high drawdown or lock in profits early. The BackTest tool lets you run any simulation you like to see the impact on your overall results.
The ZuluTrade user interface also lets you view all closed, pending and open trades. Any open or pending trades can be closed directly from the ZuluTrade interface. I.e. there’s no need to logon to your own ZuluTrade-linked broker account. When you close the trade from the ZuluTrade interface, it closes it automatically in your live broker account.
Understanding how many lots to assign to a Trader based on your investment amount isn’t always easy and takes some practise. The tools ZuluTrade provides (“Margin Call-o-Meter”, “Auto-Mode” and back-test “Simulate”) are useful but have some limitations. We have however created a useful in-house “ZuluTrade Account & Risk Settings Tool” which can help and guide you as well. The main advantage of this tool is that you can use a timeframe of your choice and hence it can be used for Traders who’ve changed their strategies. In addition, you can also read through our ZuluTrade Money & Risk Management Tips and of course you can try with a free demo account first. While it’s impossible to predict the future behaviour or success of a Trader the introduction of ZuluGuard means you have at least some control to limit the impact of each trader on your account.