Risk Management, the core of Collectiv’Traders

Collectiv’Traders is a compensation system that allows individual traders to recover some of their trading losses (up to 80%), which is a second chance for those who have made losses. Our goal is to allow more individual traders to become profitable, while official statistics announce up to 90% of losing traders. To do this, the Collectiv’Traders system goes beyond a simple compensation because we offer better compensation to traders who use low leverage (or no leverage at all).

Becoming a member of Collectiv’Traders is therefore accepting to become a responsible trader using only a low leverage, or no leverage. If the possibility of a compensation based on trading losses is the reward for reasonable used leverage, it is nevertheless the fact of training individual traders to have a good risk management which will make from them profitable traders in time.

Do not misunderstand, Collectiv’Traders takes into consideration the real leverage that you use and not the maximum leverage that your broker offers you.

Brokers that offer 400:1 leverage

The maximum leverage that a broker offers only has an impact on the calculation of the margin requirement to hold an open position. Whether your broker offers you 30: 1 … 100: 1 … 400: 1 or even more, should not have any impact on your trading risk.

When a broker offers 400:1 maximum leverage, it actually means that the margin requirement to open a trade will be 400 less than the amount of that trade.

For example, for a trade of EUR 5000 on the EUR/USD you will need to immobilize only 12.50 EUR on your account with 400:1 leverage. However, if your capital is 5000 EUR, then you have no leverage (5000 EUR on your account > 5000 EUR on the markets).

Understanding the “real leverage”

The most important is not the maximum leverage offered by a broker, but the real leverage that the trader uses. Collectiv’Traders takes into consideration the real leverage used by the trader for calculating losses compensation.

How many times is my capital invested in the markets? It is by this simple question that can be calculated the real leverage.

Example 1: You have a position of 0.06 lot on EUR/USD (ie 6000 EUR) and a position of 0.1 lot on the CAC40 (ie 5100 EUR). The total invested amount in the financial markets is therefore 11,100 EUR. If you have a capital of EUR 2000 then your real leverage is EUR 11,100 divided by EUR 2,000 so 5.55 leverage.

With such leverage, you would be entitled to 48% of your losses by being a premium member of Collectiv’Traders.

Example 2: You have a position of 0.1 lot on EUR/USD (ie 10.000 EUR) and a position of 0.5 lot on the CAC40 (25.500 EUR). The total invested amount in the financial markets is therefore 35,500 EUR. If you have a capital of 15,000 EUR, then your real leverage is 35,500 EUR divided by 15,000 EUR so 2.36 leverage.

With such leverage, you would be entitled to compensation of 64% of your losses by being a premium member of Collectiv’Traders.

How are the compensation of Collectiv’Traders calculated?

Depending on the status of the member, an individual trader can receive a compensation up to 80% of his trading losses. To take advantage of the maximum compensation, the Collectiv’Traders member should not invest more in the financial markets than he has on his account.

If a trader want to use low leverage, a penalty schedule will be applied as you can see in the table below:

Of course, many Traders will prefer to continue to use a high leverage to try to win more and faster. They will remain among the 90% of losing Traders who are trading like others would have fun at the Casino.

by Marc Raffard and Andrea Panayotova