Risk limit for investors (Investment account)
Risk limit for investment account is a core thing for investments as it helps clients sleep well at night time.
Only risk limit can make from investments really passive source of income as without it investor will be forced to monitor performance and risks of account everyday or several times a day.
How it works
Risk limit is set not on a whole account but on a link between master account and investment account (a subscription).
So Investor can set several risk limits that can be different for all master accounts.
Once risk limit is reached, the platform will close all opened positions on investment account that were copied from a master account. If it is a PAMM investor, the platform will also withdraw all funds to a payment account of investor.
Flat risk limit
Flat risk limit (in $$$). Set in absolute values in amount of currency units in which investment account is nominated (e.g. 500$ for USD account in USD)
Formula of a flat risk limit
Risk_Limit_Value = Sum of realized profit + sum of floating profit
It is calculated by equity (includes floating loss)
Sum of realized profit and sum of floating profit is calculated by positions that were copied from a particular master
Until Risk_Limit_Value > Loss_limit, subscription is active
Once Risk_Limit_Value < Loss_limit, investment account will be unsubscribed from a master
Example
Loss_limit = 500$
Until Sum of realized Profit + Sum of floating Profit is bigger than -500$, account is active (-490$ is bigger than -500$)
Once Sum of realized profit + sum of floating profit becomes smaller than -500$, subscription will be closed.