Zulutrade Money Management and Risk | Account Settings | STG

ZuluTrade Account & Risk Management

Once you are logged in to your 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 to the traders added to your account and how much risk you’re taking. At a global level, the interface lets you set the lot size of your account and a total maximum of open lots. But before we delve into deeper details of account setting, perhaps we should understand what a lot means in forex.

When setting up your account in ZuluTrade, you will realise that there are three options in the “Lot size” section: Standard, mini and micro. In forex, a standard lot is a unit of purchase and it equals 100,000 units of traded currency. As a result, a mini lot equals 10, 000 units while the micro lot equals 1,000 units. Therefore, setting 10 mini lots is equivalent to 1 standard lot.

ZuluTrade
Key Features
Copy and Social Trading Platform open to 50 Top notch Brokers
Regulated in EU and Japan
Advanced Trading Strategies to Copy
Min Deposit
$200
United States
Key Features
Copy and Social Trading Platform open to 50 Top notch Brokers
Regulated in EU and Japan
Advanced Trading Strategies to Copy
Payment Methods
Visa, Mastercard, QIWI, Skrill, China Union Pay, Bitcoin, Neteller

ZuluTrade Account Settings

 

Once you’ve selected the Trader (aka “signal providers” however this term no longer used by ZuluTrade) 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 can configure almost all the parameters relating to trades from the traders all by yourself. 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 “Trader.” As with the lot size setting, the limit and stop levels are to be considered for a single currency pair. For example, if you only want to take their EURUSD trades, or you allow them to take more risk on a specific pair, you can set it as such. In case you only want to take a trader’s signals at specific days or hour intervals when you are online, you can use the time filter. Also, if you want to take personal control of any open trades the Trader has in your account, you can lock them so that 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 in case you wish.

ZuluTrade Portfolio Screen

 

ZuluTrade Risk Allocation Custom Mode Screen

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 “Trader” 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 “Trader” in your account
  • stop following this “Trader” (i.e. don’t open any new trades)
  • stop following this trader and replace them with a similar or higher

Please note that since December 2th 2014 all EU residents need to protect each Trader in their portfolio with the ZuluGuard Capital Protection. Once your allowance is reached, ZuluGuard™ will  close all Trader’s open positions and disable the Trader from your portfolio. This rule, introduced in accordance with EU legislation, aims 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).

ZuluGuard Capital Protection

ZuluTrade ZuluGuard Screen

When using the “Auto Mode” you need to adjust the “risk meter bar” to the percentage of your equity that you wish to be used for the allocation of the settings to the traders selected. 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 “Trader” 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.

ZuluTrade Portfolio Screen

 

ZuluTrade Risk Allocation Auto Mode Screen

When allocating the risk to your account, the ZuluTrade social trading platform also allows you to use the “Simulate” function to run a test 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 Simulate- tool lets you run any simulation you like to see the impact on your overall results.

ZuluTrade simulation tool screen

ZuluTrade Trader Simulate Tool Screen

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 log on 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.

***The two modes auto and custom are only available on global accounts (demo and live), while for the Eu accounts only one mode is available and the risk –settings are allocated based on your equity and the traders added to your account’s portfolio.

ZuluTrade
Key Features
Copy and Social Trading Platform open to 50 Top notch Brokers
Regulated in EU and Japan
Advanced Trading Strategies to Copy
Min Deposit
$200
United States
Key Features
Copy and Social Trading Platform open to 50 Top notch Brokers
Regulated in EU and Japan
Advanced Trading Strategies to Copy
Payment Methods
Visa, Mastercard, QIWI, Skrill, China Union Pay, Bitcoin, Neteller

ZuluTrade Tips: Money Management & Account Setting

In the course of setting your account, when you first gain access to the Settings Tab of your account, you will notice that ZuluTrade has two risk allocation modes: Custom Mode and Auto Mode (only for global clients, for EU clients there is a single mode). These modes are meant to manage the money you have invested in ZuluTrade. If you follow more than 1 trader you first need to decide whether to invest your funds equally across those traders, or whether you want to allocate different proportions to each one. Your decision will be aligned to your risk profile. I.e. for a lower risk you’ll allocate a higher proportion to traders which have generated consistent returns with low drawdown.

In Auto mode, you can only set the Risk Weight for each trader and the maximum open trades per trader. Therefore, the system will do the selection for the number of lots per trades and you will be following the Trader as per his own Limit and Stop values.

As already discussed, the auto mode uses your account balance and historical data (profit, drawdown) to calculate the number of lots to be allocated per trader signal. However, in case you want the system to allocate more to a specific trader than the others within your portfolio, then you can achieve this by increasing the Trader’s Risk Weight.

If you use the custom mode, you can easily configure your account settings to 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 a specific Trader.

Now once you decide how you want to allocate your funds to the Traders you are following in your account settings, you must set the following parameters for every trader you are following:

Zulutrade money management

1) ZuluGuard Capital Protection:

This is the maximum amount you invest in the trader you follow and is the maximum amount in real money terms you might lose by copying the trades of this trades. Essentially, you incur this risk by following a particular trader.

In total, among all the traders you follow, you also cannot invest more than Your Total Capital Allowance. The allowance is based on your answers to the suitability questionnaire you completed when you signed up.

2) Follow Mode and Value

ZuluTrade offers 2 follow modes, Fixed Mode or Pro-Ratae Mode (which is only available since 2016).

In “Fixed Mode”, you have to allocate the number of lots you assign to each ZuluTrade trader manually. The default lot size will depend on your global account settings (i.e. standard, mini or micro). You can use decimals, so if your account setting is mini lots, assigning 0.1 mini lot is the same as assigning a micro lot to the trader. If it’s easier to think in “real money” numbers, have a look at the following example:

Allocating 1 micro lot in a $ USD ZuluTrade account to a trader means that if they trade the GBPUSD pair you’ll make or lose $0.1 per 1 pip move. I.e. if the GBPUSD gets bought at 1.56789 and sold at 1.56889, this means a profit of 100 pips and profit of $10 in your ZuluTrade account.

Same, if the GBPUSD was bought at 1.56789 and sold at 1.56689, this means a loss of 100 pips and loss of $10 in your ZuluTrade account.

If you allocated 1 mini lot, a 100 pip move would mean a profit or loss of $100.

If you allocated 1 standard lot a 100 pip move would mean a profit or loss of $1000.Please note that if your account is denominated in another currency, you’d have to apply the exchange rate to this example. E.g. if your account is in £ GBP and the GBPUSD exchange rate is 1.5, a 100 pip move in the GBPUSD pair on a mini lot would mean a profit or loss of £66.66 (i.e. 100/1.5). So, when you follow a trader in “Fixed Mode” on the ZuluTrade social trading platform, always take into account the potential “real money” values. For example, if you follow a trader who tells you to expect a drawdown of 1000 pips with their strategy, with 1 standard lot this means your account needs at least $10,000 of funds available to cover this drawdown without getting a margin call. And, this is under the very optimistic assumption that this really is the maximum drawdown their strategy would ever reach, and it won’t reach a higher drawdown level in the future.

(the value in the above examples are calculated with given leverage of 100:1. Different leverage options will affect your values)

  • In “Pro-Rata Mode, your trades will be copied proportionally and you have to select the ratio (%) between the amount of the trade opened at the provider versus the amount that will open in your account. For example, if you select 10% and the trader you follow opens 1 standard lot, then in your account 1 mini lot (= 0.1 standard lot) will be opened. ZuluTrade allows trades to be opened in amounts smaller than 1 micro lot if your broker supports this. Otherwise, these trades will be rounded to 1 micro lot (their own AAAfx broker supports this).
ZuluTrade
Key Features
Copy and Social Trading Platform open to 50 Top notch Brokers
Regulated in EU and Japan
Advanced Trading Strategies to Copy
Min Deposit
$200
United States
Key Features
Copy and Social Trading Platform open to 50 Top notch Brokers
Regulated in EU and Japan
Advanced Trading Strategies to Copy
Payment Methods
Visa, Mastercard, QIWI, Skrill, China Union Pay, Bitcoin, Neteller

How Can I Ascertain the Number of Lots to Assign to Each Trader?

When adding more traders to your portfolio, you need to know the number of lots you can assign each of them to minimise risk and increase profitability. Understanding how many lots to assign to a Trader based on your investment amount isn’t always easy and takes some practice. The tools ZuluTrade provides and which have been discussed above ( “Auto-Mode” and back-test “Simulate”) are useful but have some limitations. To help you in the allocation process, you can use a Margin- Call-O-Meter (available only in custom mode).  Based on custom settings, leverage, equity and your selected Trader’s past performance, the Margin- Call-O-Meter is an indicator that shows the likelihood of you getting a margin call (i.e. your account will be blown) based on the historical performance of the “Trader” and the settings you entered.

Whether you are using the fixed or pro-rata follow mode, the Margin-Call-O-Meter provides a good indication of how risky your allocation settings are. It uses the historical data of the traders, including drawdown, together with your allocation settings to calculate an estimate of the probability of your account getting a margin call. Because it’s based on historical settings, it’s nothing more than an indicator. If the performance of the traders you follow goes against the market and they reach new drawdown levels, you will get a margin call. Also, for any Trader who changed their strategy in the past, the indicator will not show the current up-to-date risk profile.

1) “Fixed Mode” or “Pro-Rata Mode”?

In short: We always use “Fixed Mode” and only consider “Pro-Rata” if a trader trades in different lot sizes and sends signals from a live account.

Why?

You have no control over the lot size the trader uses. Practically, there’s nothing stopping a trader from changing the size from 1 lot to 100 lots, especially when they use a demo account. As a result, “Pro-Rata” becomes riskier because you cannot be certain how much you will be risking per trade. However, if the trader is using a live account, the risk of them increasing their risk exponentially is lower and as such the “Pro-Rata” may be considered.

Yes, in the real world top traders vary their trade size depending on the trade set-up and their anticipated risk/return of the trade. However, most ZuluTrade Traders still use the same lot size for every trade they enter because “Pro-Rata” copying only became available in 2016.

2) Maximum Open Trades:

The default for this is set to “No Limit”. However, we always feel that limiting this is safe for your investment. The most obvious level is to set it to “the historical maximum number of trades” the trader opened at the same time in the past. However, quite a few providers have been reducing the number of trades they open concurrently (to get a better ranking) and, therefore, they may suggest a lower number in their profile. Please note that many traders who open multiple trades at the same time will actually open these in the same currency pair and direction. I.e. they’re all part of the same overall trade cycle and they’re just adding more to an existing position.

3) ZuluTrade Automator Settings (Optional):

ZuluTrade Automator Settings

ZuluTrade Automator rule

The Automator was added in Q1 2016 and provides you with more control over your ZuluTrade account through the creation of a simple “if this, then that” rules.

The options are pretty much endless and we’ll write a separate tips guide on the Automator soon. One obvious rule you can implement is adding individual stop levels for the traders you copy (something which used to be possible directly from your ZuluTrade portfolio view).

While any decent trader will normally set and manage their own stops to protect their followers against complete capital loss, the best practice is to apply your own stops. Doing so helps you to protect your account, especially if you’re not going to manage your ZuluTrade account on a daily basis. The best stop level is arbitrary and will depend on the trader you follow. Some traders clearly indicate the level they suggest you use. Otherwise, you can look up the lowest negative pip value of a single position within the trading history of the trader (You can do this by sorting the trading history by the “Low” value). This is a good starting point, though you may want to consider adding some considerable margin to this to allow the trader’s strategy and system to perform optimally. Normally, in the absence of historical data, there’s no guarantee the drawdown for a single trade won’t be higher than the lowest historical value. So the rule might be (SEE IMAGE):

IF PnL of any trade from a Trader is less than or equal to 100 pips, then close trades matching the condition. Alternatively, you can request an email notification and manually close the trades by yourself.

ZuluTrade
Key Features
Copy and Social Trading Platform open to 50 Top notch Brokers
Regulated in EU and Japan
Advanced Trading Strategies to Copy
Min Deposit
$200
United States
Key Features
Copy and Social Trading Platform open to 50 Top notch Brokers
Regulated in EU and Japan
Advanced Trading Strategies to Copy
Payment Methods
Visa, Mastercard, QIWI, Skrill, China Union Pay, Bitcoin, Neteller

How can I determine the Inherent Risks in ZuluTrade?

To clearly understand the risks inherent in ZuluTrade, we will review the ZuluTrade risk by looking at the various levels of risks.

Very High Risk: Assumes that the maximum drawdown for the period used will not be repeated by the ZuluTrade Trader. If it does, you’ll lose all your money. In addition, you’ll probably get a margin call well before this level is reached if the investment/allocation amount you used is the same as your total account balance. This risk level is a surefire way to lose all your money.

High Risk: This assumes that the historical drawdown level over the period evaluated will not be more than double the size in the future. Depending on the length of the period you use this is still an extremely risky approach, especially with the system and longer-term Traders.

Medium Risk: This risk level assumes the drawdown level will not reach 5 times the level used in the risk calculation. I.e. this gives you some kind off buffer to cope with an increase of drawdown of the Trader in the future, though there’re plenty of examples on ZuluTrade where trader’s drawdown levels increased during certain market conditions.

Low Risk: This level of risk assumes the drawdown level will not be higher than 10 times the level used in the calculations. I.e. this gives you a significant buffer to cope with increased drawdown levels of the signal in the future.

All these calculations are based on the premise that the future trading strategy of the ZuluTrade Trader will be similar to their previous trading strategy. If the Trader starts opening more trades and use wider stop levels the value of these risk level calculations will diminish. You can always re-do the risk level calculations on a monthly basis to take into account the latest historical data and adjust any ZuluTrade (demo) account settings accordingly.

Other Money Management and ZuluTrade Account Settings Considerations:

  • If you’re new to ZuluTrade, try your allocation settings first for a while on the free demo account, and when you’re considering following a new trader (aka “Trader”), you can add and follow them from your demo account first as well. This will show the results in money terms so you know how much movement to expect per pip on the trades you copy from this trader.
  • Always keep the ZuluTrade Margin Call-O-Meter or Risk-O-Meter significantly under 100% (unless you want to take large risks and fully accept that all your investment can be lost in 1 trade). If you’re following long term strategy traders (with a historical drawdown of > 1000 pips) even setting it at 50% is very risky.
  • Look at the maximum historical drawdown (click here to see how to calculate this) and then consider that it is almost certain this will be reached again. There’s even a high chance this will be more than double in the future or even a fair chance this could be 4 or more times as high with any long term strategies that add trades to losing positions (e.g. look at our Forex Cruise Control Case Study).
  • Have a look at our “ZuluTrade Account Settings Calculator” to give you some additional and alternative indications on the ZuluTrade account settings you could consider using when copying in fixed mode. The Account Settings Calculator takes into account historical drawdown as discussed in the previous point.
  • Consider your initial ZuluTrade investment and deposit in terms of your overall investment budget. Because ZuluTrade allows you to be flexible with your risk settings (i.e. trade with leverage), there’s no need to fund your account with all your capital. For example, if you consider investing $10,000, you can start with depositing $1000 and trade with this. Doing this means that the maximum you can lose is 10% of your investment budget. As you become more familiar with ZuluTrade and build a portfolio of trusted traders, you can gradually increase your deposit and/or accounts risk settings.
  • When you start following a trader, it’s always better to start when they don’t have any current open trades. This is because current open positions may influence the decision on any new trades a trader opens. However, with ZuluTrade traders who trade actively and have constantly open positions, this isn’t always possible. Just make sure you don’t start following them when they’re already severely in the red.
  • Because ZuluTrade “Traders” get paid only when they have a profitable month, some may take more risk at the end of the month to chase profits or extra commissions. You may, therefore, want to consider not investing in the past few days of a month and wait for the 1st day of the next month.
  • Traders will have winning and losing streaks. You cannot predict which one will be next when you start your investment with the trader. However, if you phase in your investment and allocation (i.e. over a few days, weeks or months) you reduce the risk that all your allocation is invested at once just before they go on a losing run.
  • When you change your portfolio, make sure you close any trades still open by any “trader” you remove (i.e. stop copying) from your account.
  • If you’re a ZuluTrade customer based in the EU please be aware that you can only copy traders in the top 1,000 and whose drawdown is lower than 30%. However, what this also means is that when a trader drops out of the top 1,000 or their drawdown goes over 30% no new trades from this trader will be opened (hence your results will be decoupled). You, therefore, need to keep an eye on this and ideally create some rules using the Automator which will warn you a bit in advance of this (e.g. you can write a rule warning you when the losses of the individual trader pass a certain threshold). Even for non-EU customers, this is good practice.
ZuluTrade
Key Features
Copy and Social Trading Platform open to 50 Top notch Brokers
Regulated in EU and Japan
Advanced Trading Strategies to Copy
Min Deposit
$200
United States
Key Features
Copy and Social Trading Platform open to 50 Top notch Brokers
Regulated in EU and Japan
Advanced Trading Strategies to Copy
Payment Methods
Visa, Mastercard, QIWI, Skrill, China Union Pay, Bitcoin, Neteller

¹ Risk Definitions:

Very High Risk: Assumes that the maximum drawdown for the period used will not be repeated. by the ZuluTrade Trader. If it does, you’ll lose all your money. In addition, you’ll probably get a margin call well before this level is reached if the investment/allocation amount you used is the same as your total account balance. This risk level is a surefire way to lose all your money.

High Risk: This assumes that the historical drawdown level over the period evaluated will not be more than double the size in the future. Depending on the length of the period you use this is still an extremely risky approach, especially with the system and longer-term Trader.

Medium Risk: This risk level assumes the drawdown level will not reach 5 times the level used in the risk calculation. I.e. this gives you some kind off buffer to cope with an increase of drawdown of the Trader in the future, though there’re plenty of examples on ZuluTrade where trader’s drawdown levels increased during certain market conditions.

Low Risk: This level of risk assumes the drawdown level will not be higher than 10 times the level used in the calculations. I.e. this gives you a significant buffer to cope with increased drawdown levels of the signal in the future.

All these calculations are based on the premise that the future trading strategy of the ZuluTrade Trader will be similar to their previous trading strategy. If the Tradre starts opening more trades and use wider stop levels the value of these risk level calculations will diminish. You can always re-do the risk level calculations on a monthly basis to take into account the latest historical data and adjust any ZuluTrade (demo) account settings accordingly.

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