Implementation guide · Copy Trading and Allocation
High-Water Mark: Performance Fee Calculation
Calculate a fictional performance fee through gain, loss and recovery periods, with an explicit watermark convention and separation from loss limits.
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Published by FxTrusts, a supplier of brokerage and prop firm technology. Prepared with AI-assisted research and drafting; reviewed against the cited public sources. Examples are illustrative. Product links describe our services.
Quick answer
A performance-fee high-water mark is a reference used to avoid repeatedly charging a performance fee on the same recovered gains under the applicable policy. The valuation basis, fee timing, cash-flow adjustments and post-fee watermark convention must be stated before calculating a charge.
Use the watermark for its actual purpose
A fee watermark identifies the level above which new fee-eligible performance may arise. It is not a trailing loss floor and does not by itself restrict trading or guarantee recovery after losses. cTrader Copy documents a high-water-mark approach for its own fees, while B2COPY distinguishes fee types and their calculation bases. The selected product and contract determine the actual rule; the same label does not make every implementation identical.
Specify the valuation and fee event
A calculation can depend on balance, equity, realized results or another defined performance measure. Fees can be assessed at scheduled periods or specific events. State whether costs are already included and whether a displayed accrued fee is an estimate or a settled charge. Cash flows must be handled under the policy so a new deposit is not mistaken for a trading gain. Do not invent an adjustment rule from the account balance alone.
Document the post-fee reference
When a fee is deducted from the account, the next watermark may be adjusted according to the contract’s convention. A worked example must say what happens after the deduction instead of mixing a pre-fee benchmark with post-fee values without explanation. The fictional example below resets its reference to the post-fee account value at a qualifying fee event. It is one declared model, not a claim about all managed-account products.
Reconcile losses and recoveries without double charging
A fall below the stored reference produces no new eligible gain under this model. Recovery to that reference also produces no fee. Only an amount above it enters the next fee calculation. Keep the previous watermark, current valuation, eligible gain, rate, charged amount and updated reference together. If an adjustment or account transfer changes the reference, retain the authorization and original values for review.
A fictional post-fee watermark convention
Assume an initial watermark of 10,000, a 20% performance fee, no external cash flows and post-fee watermark resets. At a pre-fee value of 11,000, the fee is 200 and the new reference is 10,800. A loss to 10,200 and recovery to 10,800 attract no fee. A later value of 11,300 creates 500 of new eligible gain, a 100 fee and a new reference of 11,200.
| Event value before fee | Eligible gain | Fee | Watermark afterward |
|---|---|---|---|
| 11,000 | 1,000 | 200 | 10,800 |
| 10,200 | 0 | 0 | 10,800 |
| 10,800 | 0 | 0 | 10,800 |
| 11,300 | 500 | 100 | 11,200 |
Implementation checklist
- Declare valuation basis, fee events and the post-fee reference convention.
- Separate external cash flows from performance.
- Retain the previous watermark and every authorized adjustment.
- Do not confuse a fee watermark with a prop loss threshold.
Sources
These documents support the reference. Check the original publication for current requirements and the limits of its scope.
- cTrader Copy high-water mark modelhelp.ctrader.com
- cTrader Copy fee calculationshelp.ctrader.com
- B2COPY fee types and calculation scopeb2broker.com
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