The Success Fee is one of the most important factors in a Profit Sharing service, as it directly affects the net profitability that users will receive for having selected a strategy.
Over time, an average range has been established within our Marketplace, which users are comfortable with and feel is fair when choosing a strategy to subscribe to.
💡 The purpose of this article is to provide examples, ideas, and tips to the traders so that they can maximize their profits in a way that is fair to their followers.
In this Article:
Being a good trader, how much can I earn with Success Fees?
This is one of the most important points why a trader migrates from Copytrading to Profit Sharing services. Because of the possibility of generating more income.
The positive thing about all this is that it brings great value to the users as well, so it is a win-win. By not having to pay anything upfront users get a lot of benefits, such as being able to test a strategy with low capital, only paying if the account is profitable, making sure that the trader will stay motivated to achieve the best possible results.
Let's take an example:
If we have the same Copy Trading and Profit Sharing service, where the strategy obtains a profit of 10% monthly in both modalities and manages exactly the same amount of capital, 200.000 USDT, having the same amount of subscribers, 100 each service. What would be the profit of each one?
Copy Trading: The provider charges 25 USDT per subscription, so you will receive 2500 USDT per month, regardless of the returns obtained.
Profit-Sharing: The provider charges a 30% success fee, so you receive 25% of the profit (5% is Zignaly's share). Therefore, by generating 10% of those 200,000 USDT, he generates 20,000 USDT of profits, receiving 5,000 USDT directly in Success Fees.
The important thing is that not only the numbers are better, but also that more and more users prefer to pay only if they make profits, instead of paying a subscription in advance.
If you already have a Profit Sharing service or are thinking of creating one, surely you have already done this basic math, but we have found that the Succes Fees generate some doubts in some of our traders.
What percentage can I place?
Currently, our Marketplace has established a range in which users feel comfortable paying between 20% and 30%. Most traders have chosen to select a percentage within this range, of course, some services are below these values and others above, but we have detected that most of them focus on these values and they are the ones that generally manage the largest amount of users' capital.
What happens if I choose a percentage outside this range?
Zignaly does not set any limitation in this aspect, it is the community itself that has the freedom to choose. But based on our experience, if you set it below and your strategy is good, you will receive a large number of subscribers and you could have scalability problems in your strategy due to the large amount of volume that you could manage. As we specified in chapter 4 "Binance Trading Rules".
And on the other hand, if you place it above it is possible that you will receive fewer funds, have a high opportunity cost, and will end up earning fewer commissions than if you had placed it within the range, even if your percentage is higher.
Can I modify that percentage of the Success Fee?
Yes, of course, you can change it. An email will be sent to all your subscribers notifying them of these changes.
Remember that communication is very important, and if you decide to do something like this, it is highly recommended that you publish it in the service feed at least one week in advance and explain the reasons for this change. This way all your followers will have the freedom to decide whether to continue with your service or not.
In the past, there have been services that have made this type of change without warning and their followers have taken it very badly. Communication is very important, as we explained in Chapter 1 "Best Practice".
When do I receive these Success Fees?
The Success Fees are paid automatically every time the High Water Mark is surpassed, if we get some negative results in our strategy, we must recover those losses before charging commissions again. But remember that each user has an independent High Water Mark, so there could be some users that pay us Success Fees and others not. You can always check it in the "Users" tab of the service, there you will see the global PnL of each follower, if it is negative it means that it is below the High Water Mark and if it is positive it means that it is above.
Additionally, as we announced a few weeks ago, we will incorporate discounts for the payment of these Success Fees in our token, ZIG coin. Granting additional benefits for each user and also for each provider of a Profit Sharing service.
Remember, if you have open positions with negative PnL, it is possible that some profits will be retained until those positions are closed, once this happens the profits are sent to the users and at that moment the Success Fees are paid.