Let's dive into the need-to-know information on automated trading with Profit-Sharing!
In this Article:
How is Profit Sharing possible?
For this model to be possible it is necessary to use a Zignaly Exchange account, which is nothing more than a sub-account within the Binance Broker Program, in which Zignaly participates.
This allows us to create joint pools where both trader's and user's funds are allocated so the service provider can manage them and apply his strategy correctly.
And the best part is that we maintain the security of your funds so that no one, except yourself, has access to withdraw them. If you want to know more about how this works, you can read this article.
Can I use Profit Sharing with my Binance account?
Profit-Sharing services are exclusive to Zignaly Exchange, meaning that we can only use them with this exchange. If you have an account connected with an API, it will not allow you to use it.
Every time a position is closed, it will calculate the profit/losses from the closed position.
The success fees are only taken once a new trade is closed reaching a new profit high & will only be taken from the difference between the last high and the new one.
profit levels chart example:
At the moment, you can use ZIG coins to pay for the success fees and immediately get a 6% discount.
Check out more information here.
If the trader doesn't accept ZIGs
We buy back those ZIGs by the current market price on AscendEx, like every regular market participant.
To give an example with the number:
A trader generated $1000 in profit and took 20% as a success fee. That means he takes $200.
If the user chooses to pay the success fee with ZIGs, but the trader doesn't accept them, the user has to pay 200$ -6% discount = 188$
From there, $150 belongs to the trader, and the $38 remaining for Zignaly. So we are giving discount from our end.
The user paid in ZIGs, so we calculate the current market price (on Ascendex) at the time of the payment and see that $188 is 6260 ZIGs. We get those ZIGs to our treasury, and then, also from our treasury, we get $150 and transfer them to the trader. So we are paying for those ZIGs at the current market price.
High-Water Mark Calculation
We are using a high-water mark, each time there are profits, and profits + current balance is above the high-water mark, the profits will be shared, however, if there are open positions with losses at that moment, the negative amount will be retained until the positions are closed.
Every time that a position is closed, we analyze the status of the current open positions. If they are in profit (and generate new all-time high equity value), success fees will be paid.
If the current open positions are in loss (unrealized PnL), your earnings are placed under Retain.
This puts a hold on paying the trader the success fee, knowing that the current open trades may end up closing with a loss. In the detail of the profit calculation when your profits are sent to the Retain because of an in-loss position:
If a position closes with a loss, that amount will go to your account to make up for the losses.
If the positions that you had opened close with profit, and if you are over your watermark, the Retain amount will be added back to your profit with corresponding success fees.
In case the in-loss positions continue to be there when the next positions close, we analyze the status of the open positions again.
If they are in profit, we account you the profit of the position + the pending Retain.
If they are in losses, we store the new profit in the retain. Lastly, if the losses are small, we can share some profits (equal to the current losses) and account for the profits with you.
Withdraw or Re-invest the profits
You may choose to withdraw your profits back into your Zignaly exchange account, these will no longer be locked. The profits with be transferred into your Zignaly exchange account.
Or, choose to re-invest the profits automatically into your allocated balance.
When you connect to a Profit Sharing service, the allocated amount that you determine is deposited into a joint pool, which is specifically assigned to this service.
The service works with a single position for all users. It means both the trader who manages the strategy and the users connected, are owning the same positions.
This is only possible when all the funds are pooled into 1 service account and the trader will manage them. Thus, when you connect to a Profit-sharing service, your allocated funds will be in this service.
You can see the deposit and all accounting information on the 'analytics' tab from your dashboard.
Here is a quick look into the analytics section below.
Modify the allocated balance
You will be only able to increase the allocated balance. This allocated balance will be noted and used in the next positions to open.
To do this you must click on the pencil icon that appears in the service profile and enter the new amount you wish to invest in addition to the amount you were currently investing.
For example, if you were investing 100 USDT in this service and you want to increase by another 100 USDT, you should put in 200 USDT by clicking on the pencil.
Decreasing the allocated balance is not permitted.
Decrease your allocated balance
If you want to do this, you should disconnect yourself from the service and then connect again with the new amount.
Please note there will be a processing time when disconnecting from the profit-sharing service, to process the accounting & the release/transfer of your funds.
Disconnect from a service- withdraw funds
- Soft Disconnection -
Currently, in the profit-sharing model, you can not disconnect immediately from a provider.
When you select to cancel the disconnection, no new positions will open, but if part of your funds is being used in open positions, that locks your invested funds. You must wait until all positions, that you are participating in, have been closed by the trader.
The balance will remain locked during this time. Once all positions that you have participated in, have been closed by the trader, your allocated balance will be transferred back into your connected Zignaly exchange (wallet) account.
- Hard Disconnection -
We are developing an alternative to allow users to safely disconnect without affecting the service or other users who are participating in it.
This feature will be integrated when the new version of Profit-Sharing 2.0 is out.
Please be aware that any investment has risks, this risk is multiplied by several factors when you are dealing with derivates. Please do your own research & choose your service carefully.
Keep in mind that previous results do not guarantee future performance, you may want to start with a small amount until you are comfortable adding to your investment. >Tips when choosing a Profit-Sharing Service
Warning: In the case of futures accounts, the capital not used in the positions acts as Margin and is the collateral asset of the leverage used in each position. This means that your funds could be lost in their entirety even if you are not yet participating in any trade & if the service becomes liquidated.
📌 Next step> How to connect to a Profit-Sharing service