Situation 1. Copiers Close Positions Themselves
Copiers close positions themselves before the lead traders close positions, which will lead to inconsistency between traders' and copiers' ROI.
Situation 2. The Costs of Futures Are Different
-When the lead trader has already established a position in a certain Futures market before the copier starts copying trades, and then adds to the position after the copier begins copying, it will result in different costs for both parties in that Futures. Therefore, after closing the position, there may be an inconsistency in the profits between the copier and the lead trader.
Situation 3. Lead Traders' Margin Change
-When the lead trader has an open position, and either increases or decreases the margin before performing a top-up operation, the ratio of positions will be imbalanced when both parties open new positions subsequently.
Situation 4. The Leverages of Lead Traders & Copiers Are Different
-For certain Futures, the maximum leverage for lead traders is 100X, while the maximum leverage for copiers is 20X. -Inconsistent leverage may lead to discrepancies in profits between the two parties. -This situation only occurs when the copier uses Advanced Mode to copy the lead trader.
Situation 5. The Copier Uses Fixed Copying Proportion
-The copy trading copying proportion refers to the amount by which the copier adjusts its position in accordance with the trader's position changes based on a set multiplier. For example, if the copy trading multiplier is set to 10X and the trader adds 10 Futures contracts, the copier will add 10 × 10 = 100 Futures contracts. -The copy trading proportion can be adjusted between 0.01 and 100. It is recommended that the proportion be set reasonably based on the ratio of the copier's capital to the trader's capital.
Setting Suggestion:
1.Copiers with small capital should copy lead traders with large capital
-Example: If the trader's equity is 1000 USDT and the copier's capital is 100 USDT, it is recommended to set the copying proportion to 0.1 (100 ÷ 1000).
2.Copiers with large capital should copy lead traders with small capital
-Example: If the trader's equity is 1000 USDT and the copier's capital is 5000 USDT, it is recommended to set the copying proportion to 5 (5000 ÷ 1000).
Situation 6. Slippage
-The Copy Trading system manages the copier's positions using limit orders for opening and market orders for closing. When the lead trader trades in a Futures market with insufficient depth or during extreme market conditions, the lead trader and the copier may experience significant profit discrepancies due to slippage. -The lead trader uses limit orders to open positions and market orders to close positions. This back-and-forth may lead to slippage, resulting in price discrepancies compared to the copier's execution. -The use of limit orders may result in the copier not executing trades at the normal ratio.
Check the details below: https://www.gate.com/help/quants/product_updates/33403/notice-gate.io-copy-trading-has-added-the-function-of-slippage-protection
Situation 7. Sharing Risk Limits Can Lead to Copy Trading Failures.
1.What is Risk Limit?
Risk limit is an important risk management tool designed to reduce potential risks associated with market fluctuations by setting a ceiling on the number of positions a user can hold. In Futures trading, risk limits can effectively prevent severe price fluctuations in the market caused by large-scale forced liquidations. Operating Mechanism -When the position value reaches or exceeds the risk limit, the system will automatically increase: -The maintenance margin ratio -The initial margin ratio -Users must invest more funds to maintain their positions, reducing the risks associated with high-leverage trading.
Notice: -Risk limits for different Futures are different. -Each limit corresponds to different margin requirements; the larger the position value, the higher the margin ratio.
2.Why Will Risk Limits Lead to Copy Trade Failures? Which Situations Will Easily Trigger Copy Trade Failures?
-The risk limit for the copier is consistent with that of the lead trader, regardless of the amount of capital the copier has. -When the copier has a large amount of capital, they may be unable to continue copying the lead trader's operations if their positions exceed the risk limit, failing to copy trades. -When the copier's capital is significantly larger than the lead trader's capital, the lead trader trades Futures with relatively low risk.
3.Case Study of Copy Trade Failures
Default parameters: lead trader's capital: 1,000 USDT; Copier's capital: 10,000 USDT; Risk limit for a certain Futures: 5,000 USDT; Copying method: Proportion to total. 1.The lead trader uses 5 USDT as margin with 50x leverage, resulting in a position value of 250 USDT. -Therefore, the copier uses 50 USDT as margin with 50x leverage, resulting in a position value of 2,500 USDT. -Since the copier's risk limit is still 5000 USDT, and 2500 USDT is less than 5000 USDT, the order is successfully placed.
2.The lead trader then continues to use 10 USDT as margin with 50x leverage to open a position worth 500 USDT. -Therefore, the copier uses 100 USDT as margin with 50x leverage, resulting in a position value of 5,000 USDT. -The copier's position value would be 2500 + 5000 = 7500 USDT, which exceeds the risk limit of 5000 USDT. As a result, the order will fail.
4.How to reduce copy trade failures caused by Risk Limits?
Avoid using large amounts of capital to copy trades: -Copiers should avoid using large amounts of capital to copy trades. They should refrain from copying lead traders whose capital amounts differ significantly from their own to reduce the risk of copying failures caused by risk limits. Split capital across several accounts for copy trading: -Users can split their capital across several accounts for copy trading, which reduces the amount of capital in any single account. -Note: The risk limits for sub-accounts and the main account are independent. Users can diversify their investments by opening multiple sub-accounts. Lead traders' risk management -After accepting large copiers, lead traders should adjust their Futures risk limits to meet larger copying requirements. -Directly remove copiers with excessively large amounts to ensure stability and controllability of trading.
-Set Risk Limit on Web:
Perpetual Futures - Click Icon - Set
-Set Risk Limit on APP
Futures - Click Icon - Set
