Basic Logic of Stock Copy Trading

The stock copy trading mechanism replicates trades based on the proportion of available assets.

Calculation Formula

1. Buy Scenario:
   1. Number of shares bought by the copy trader = (Number of shares bought by the lead trader) / (Lead trader's available balance before buying) * (Copy trader's available balance before buying)
   2. The number of shares bought by the copy trader must be at least 0.01 shares, and is rounded down to two decimal places.
2. Partial Sell Scenario:
   1. Number of shares partially sold by the copy trader = (Number of shares partially sold by the lead trader) / (Number of shares partially sold by the lead trader + Total current holdings of the lead trader) * (Total current holdings of the copy trader)
   2. If the number of shares sold by the copy trader is ≥ 0.01 shares, it is rounded up to two decimal places.
3. Full Sell Scenario:
   1. The copy trader will fully sell their position following the lead trader's full sell.

Example

1. Buy
   1. The lead trader buys 100 shares of AAPL at an average price of 100 USD, with a fee of 60 USD. After the transaction, the lead trader's available balance is 5,000 USD.
   2. The copy trader's current available balance is 1,999 USDT.
   3. Number of shares bought by the copy trader = 100 / (100 100 + 60 + 5,000) 1,999 = 13.2735 shares.
   4. Since there is a minimum limit for the number of shares that can be bought, the copy trader's shares are truncated to 13.27 shares.
2. Partial Sell
   1. The lead trader holds 100 shares of AAPL and partially closes 50 shares.
   2. The copy trader holds 2.11 shares.
   3. Number of shares partially sold by the copy trader = 50 / 100 * 2.11 = 1.055 shares.
   4. According to the calculation logic, the copy trader should sell 1.06 shares.
3. Full Sell
   1. If the lead trader fully sells a position, the copy trader will also fully sell the corresponding copy position.

Common Copy Trading Failure Scenarios

1. When the copy trader's available funds are less than the lead trader's, if the lead trader buys 0.01 shares, the copy trader's calculated purchase (based on the asset ratio) will be less than 0.01 shares (0.01 is the minimum tradable amount). Therefore, the copy trader's buy order will fail.

Stock Profit Sharing Logic

As a Gate stock lead trader, you can earn a percentage of the net profits generated by your copy traders. This profit-sharing mechanism uses the High Water Mark (HWM) principle for calculation.

Profit Sharing Mechanism: High Water Mark (HWM) Calculation for Copy Traders

• The profit share is calculated based on the copy trader's cumulative net profit and loss during the copy trading period (including both realized and unrealized P&L), following the high water mark principle.
• Profit sharing only occurs when the copy trader's cumulative net P&L exceeds the previously recorded highest net P&L.
• If there is a loss during the copy trading process, the lead trader can only qualify for profit sharing again after fully recovering the loss.
• A new high water mark is established only when the cumulative net P&L exceeds the previous high, ensuring that lead traders are rewarded only when they continue to generate profits for copy traders.

Calculation Logic

1. Calculate the copy trader's cumulative net P&L during the copy trading period
   1. Cumulative net P&L for the period = Current net asset value - Total deposits since the start of this copy trading period + Total withdrawals since the start of this copy trading period
      1. Total deposits since the start: initial copy trading capital + cumulative deposits during the copy trading period
      2. Total withdrawals since the start: cumulative withdrawals during the copy trading period
   2. Eligible P&L for profit sharing = Cumulative net P&L for the period - High water mark at the last profit sharing trigger
2. Profit sharing is calculated only if "eligible P&L for profit sharing" > 0; otherwise, no profit share is calculated.
3. The profit share amount for this copy trader during the period = Eligible P&L for profit sharing * Profit share ratio
4. Sum the profit share amounts for all copy traders under the lead trader to get the total profit share amount to be transferred to the lead trader.

Example

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Core Stock Metrics Calculation

Profit and Loss

1. Calculation Formula
   Period P&L = Current assets – Total deposits during the period + Total withdrawals during the period – Initial assets
2. Example
   Current assets: 150, assets 7 days ago: 100, total deposits during the period: 20, total withdrawals: 10. The 7-day P&L is:
   7-day P&L = 150 – 20 + 10 – 100 = 40

Rate of Return

1. Calculation Formula
   Rate of return = (Ending assets – Total deposits during the period + Total withdrawals during the period – Initial assets) / (Initial assets + Total deposits during the period)
2. Example
   Current assets: 150, assets 7 days ago: 100, total deposits during the period: 20, total withdrawals: 10. The 7-day rate of return is:
   7-day rate of return = (150 – 20 + 10 – 100) / (100 + 20) = 33.33%

Sharpe Ratio

1. Calculation Formula
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Maximum Drawdown

1. Calculation Formula
   Maximum Drawdown Rate (MDD) = Max[(Historical maximum rate of return – Current rate of return) / (Historical maximum rate of return + 1)]
2. 7-Day Maximum Drawdown Example
   To calculate the maximum drawdown at 00:00 on June 8, use the rate of return at 00:00 on June 8 as the starting point, calculate the 7-day drawdown for the period from 6.1 to 6.8, and identify the maximum value.

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Frequently Asked Questions About Stock Copy Trading

1. Does stock copy trading have market closure times?
   1. Gate's stock market operates 24/7 with no market closure, meaning you can buy and sell at any time. Stock copy trading also supports 24/7 trading.
2. Explanation of CFD Copy Trading End Popup Fields
   1. Total Copy Trading Assets
      1. The net asset value of the copy trading sub-account, including unrealized P&L.
   2. Estimated Total P&L
      1. Follows the current P&L situation of the lead trader. Profits are positive, losses are negative, with appropriate color coding for gains and losses. This is a total figure.
      2. Estimated Total P&L = Total copy trading assets - Initial investment + Cumulative additional investment - Cumulative withdrawals
   3. Estimated Profit Share Amount
      1. Settled profit share amount + Remaining profit share amount
      2. If no profit share has been paid, displays 0.00 USDT; if profit share has been paid to the lead trader, it displays normally.
   4. Estimated Receivable Amount
      1. Estimated receivable amount = Total copy trading assets - Remaining profit share amount
3. Does profit sharing reduce copy trading returns?
   1. For copy traders, profit sharing with the lead trader only occurs when there are profits. No profit share is taken during losses, so only a portion of profits is shared when profitable.
   2. Additionally, if there is a loss in any profit-sharing period, no profit share is paid. Only after the lead trader recovers the loss and achieves a net profit will a new profit share be paid.
   3. This profit-sharing plan fully considers the actual interests of copy traders, ensuring that profit sharing only occurs when copy trading is profitable.

Disclaimer

The content provided herein is for reference and educational purposes only and does not constitute any financial, investment, trading, or legal advice, nor does it constitute an offer or solicitation to buy or sell any digital assets. Gate makes no express or implied representations or warranties regarding the accuracy, completeness, or timeliness of the information contained herein. Product features, interfaces, rules, and fee structures may be updated or adjusted at any time. Please refer to the latest announcements and the actual information displayed on the Gate platform for the most accurate details.
Digital asset investments involve significant risk, and prices may fluctuate substantially. You may lose the entire amount of your investment. Please make decisions cautiously based on your own financial situation and risk tolerance after fully understanding the associated risks. If necessary, you are advised to consult an independent professional financial or legal advisor.
For more information about potential risks, please refer to Gate's Risk Disclosure and User Agreement.