This Formula shows how exactly the Bonus is calculated:
Bonus: (in the Live Account currency) = (Notional Volume * Rate of copied and traded instrument's base currency to USD / 1,000,000 USD) * 50 USD * 2 * Rate of USD to Live Account's currency.
Explanations: this multiplier (2) means that NAGA Trader pays a doubled Bonus for a round-turn trade. Note: NAGA Trader pays up to 50$ in copy bonus per $1,000,000 traded volume. The actual amount may vary between $10 and $50 and is subject to the decision of the company.
The following lines describe the logic behind the calculations that determine the traded volume in $, the commissions we generate and the bonus we pay out to our leaders (traders who are copied by other traders). Before going into more detail, let us first take a look at the term volume and why it plays such an important role in order to determine the commissions and the bonus we pay out.
In trading, every single trade that is generated is resulting in a certain volume that is measured in a certain currency (mostly USD, EUR, JPY, or GBP). By applying volume as a standard measure, every single broker worldwide can be compared in terms of their performance. When broker A is generating 2 bn USD in volume per month and broker B 3 bn USD, then we can conclude that broker B has a higher market share in the overall market in terms of volume which in the end determines the revenue of the entity.
As said above, the commissions generated depend on the volume a broker generates. Usually, there are fixed rates per instrument type such as Forex, CFD, Index, or Commodities and per one million USD in turnover. We can, for instance, define that for 1 Million USD in volume in Forex, the broker is earning 50 USD.
Now you probably ask yourself? Earnings from what? The magic lies in the word spread and was described in the document NAGA Trader Trading made simple. It is basically an arbitrage business. You buy one share of apple for 100 USD and your clients buy it for 101 USD from you. The profit for you is one USD and covered in the spread – the difference between the sell and the buy price.
Our business model is based on the fact, that we want to incentivize our traders to share the trades with other traders by offering a copy bonus for every trade that gets copied. Since every single trade copied generates a different volume, we are paying our traders by the volume that the copers generated through copying. Since we wanted to have a standard procedure here, we have simply fixed the copy bonus to one million USD traded and pay our traders/leaders 10 USD per one million USD in generated volume by their copiers. Meaning that if a trade gets copied by 5 traders and they altogether trade 100,000 USD in volume, then we make amount X.
SYMBOL TYPE & EARNINGS MODE
As described at the beginning of this document, the volume generated by the traders is the crucial variable determining the commissions and the bonus. Thus, we need to understand how the volume is calculated in detail. This brings some new variables/terms into the game:
Symbol type: Usually brokers differentiate between FX, Indices, Equities, Commodities, Metals and Future Indices. In our current instrument list, we distinguish between:
- Exchange Traded Funds
- All Equities (Equities NL, Equities ES, Equities UK, Equities CHF, Equities FR, Equities USA, Equities DE)
- Future Indices (not included in the list so far)
The above symbol types are then matched with the corresponding earnings modes:
EARNINGS MODE - LOT & LOT SIZE
These different earnings modes are further based on a basic underlying calculation:
Forex: Lot * Lot Size * Conversion rate
CFD: Lot * Lot Size * Market Price * Conversion rate
CFDP: Lot * Lot Size * Market Price * Conversion rate / 100 (here we divide by 100 because CFDP includes Stocks traded in the UK, where the underlying symbol is quoted in pennies and not in pounds.
Bullion: Lot * Lot Size * Market Price *Conversion rate
OIL: Lot * Lot Size * Market Prize * Conversion rate IDX: Lot * Lot Size * Market Prize * Conversion rate.
What are lot and lot Size?
Lot: In our calculations, we have fixed this variable to 1.
Lot Size: Every earnings mode has different lot sizes, which reflect the size of a lot. It is basically also a constant variable for every instrument. For Forex the lot sizes are always 100,000 and for CFDs, it is always 1.
Since metals are usually traded in ounces and commodities like oil in the barrel, the lot sizes vary as well. In our case, we have for instance lot size = 5.000 for silver and 1,000 for oil. In case of Index (IDX), we have different lot sizes based on the traded symbol. For Dax, for instance, the lot size is 25 EUR.
HOW VOLUME IS CALCULATED
After describing the terms lot and lot size which determine the volume traded, we are now able to take a look at commissions which are based on the traded volume. The example below shows the underlying calculations:
First of all, we need to take a look at the contract size. The contract size needs to be shown in USD. So when buying 1 lot EUR/USD, we are buying 100,000 EUR and selling (1,12 * 100,000 = 112,000 USD). Meaning that we trade in this case 112,000 USD. How do we come up with this number?
Lot (1) * Lot Size (100,000) * Conversion rate EUR to USD (in this case 1.12) = 112,000 USD in traded volume.
We need to take a look on the lot size. Lot size for Dax for instance is fixed at 25 EUR. Meaning that if a trader opens 1 Dax contract, he trades 25 EUR * 10,700 (current price of Dax at the moment) = 267,500 EUR.
Now we need to convert this to USD by taking the current conversion rate (let us say it is 1,10). So we convert 267,500 EUR to USD and get 294,250 USD.
CFD & CFDP:
We need to take a look at the quote of the contract. Let us say we buy BMW stocks which are quoted in EUR. We buy 100 stocks with a price of 50 EUR each. We, therefore, buy a volume of 5,000 EUR. Now we need to convert this to an equivalent amount in USD. So we have traded 5,000 * 1,10 = 5,500 USD.
As mentioned earlier, bullion (in our case gold and silver) have different underlying lot sizes which are 5,000 for silver and 100 for gold. The calculation for silver for instance is the following: 1 * 5,000 * current price (e.g. 20 USD) * conversion rate (1) = 5,000 * 20 = 100,000 USD in traded volume.
As mentioned earlier, oil (in our case brent and crude) have different underlying lot sizes which are 1,000 for both. The calculation is the following: 1 * 1,000 * current price (e.g. 40 USD) * conversion rate (1) = 1,000 * 40 = 40,000 USD in traded volume.
HOW COMMISSIONS & BONUS ARE CALCULATED 1/2
Now we need to take a look on the commission we earned per Million traded in USD. Let us now assume that we earn 50 USD per one Million
USD in traded volume. For coming up with the commissions we earn we simply multiply the volume traded with the 50 USD and divide by 1,000,000.
100,000 USD traded in Forex + 150,000 USD traded in CFD = 250,000 USD traded * 50 USD per Million in commissions / 1,000,000 = 12,5 USD in commissions for us.
At the moment we pay our users a copy bonus based on the type of the traded instrument and the traded volume. Let us now take a look at how the bonus is calculated. As mentioned the bonus is based on the traded volume in USD. We pay out 10 USD in bonus per 1 Million USD in traded volume. This is a commission for a single side trade. Commission for a round turn trade (opening and closing) is doubled and is fully charged at the opening of the order.
The formulas below show how exactly the bonus is calculated:
Bonus (in the deposit currency) = Traded volume * 10 USD / 1,000,000 USD * 2 * Rate of USD to account's deposit currency.
10 USD = value we set for the bonus per traded million in USD.
2= this multiplicator means we take a doubled bonus for a round-turn trade. The logic behind is that we want to display the total copy bonus when the trade was opened.
HOW COMMISSIONS & BONUS ARE CALCULATED 2/2
Example for Forex
Account's deposit currency: EUR / Instrument traded: USDCAD Volume traded by copying: 1 lot Order opening rates:
Bonus (in account's deposit currency) = (Contract size * Rate of traded instrument's base currency (USD) to USD / 1,000,000 USD) * 10 USD * 2 * Rate of USD to account's deposit currency (EUR)
Bonus (in EUR) = (100,000 USD * 1 / 1,000,000 USD) * 10 USD * 2 * (1 / 1.39116) = 1.44 EUR in bonus.
The formulas below show how exactly the bonus is calculated for Commodities / Index
We need to take a look on the lot size. Dax for instance is fixed at 25 EUR. Meaning that if a trader opens 1 Dax contract, he trades 25 EUR * 10,700 (current price of Dax at the moment) = 267,500 EUR. Now we need to convert this to USD by taking the current conversion rate (let us say it is 1,10). So we convert 267,500 EUR to USD and get 294,250 USD. Now comes the bonus part where we would pay the user 294,250 * 10 USD *2 / 1,000,0000 = 5.89 USD. If we he was copied with an overall value of 1 Dax contract.
The formulas below show how exactly the bonus is calculated for CFDs
We need to take a look on the quote of the contract. Let us say we buy BMW stocks which are quoted in EUR. We buy 100 stocks with a price of 50 EUR each. We therefore buy a volume of 5,000 EUR. Now we need to convert this to an equivalent amount in USD. So we have traded (copies traded) 5,000 * 1,10 = 5,500 USD. Now considering the bonus payment, we end up paying 5,500 * 10 * 2 / 1,000,000 = 0,11 USD.
As we are a European company we want to display the bonuses in EUR. So what is here to do? We need to convert all paid bonuses in real time to EUR. Meaning that we consider the current exchange rate.
You can read more about the NAGA Trader Bonus Structure in our Legal Documentation.
We hope this guide was helpful. Read more articles on how to use NAGA Trader in the Help Center. If you still have questions, сontact Support Center directly via [email protected]