In the development of advanced trading platforms, it is crucial to implement features that ensure consistency and reliability. One such feature is Follower Protection, a mechanism designed to keep followers synchronized with the actions of the leader in a trading strategy.
The Follower Protection functionality is activated through the Follower Protection toggle within the cockpit below is a detailed explanation how the Follower Protection works to find out if it is something you want to use.
What is Follower Protection?
Follower Protection ensures that when a leader closes their position and reaches a quantity (qty) of 0, all followers automatically perform the same action, regardless of partial trades or adjustments made by the followers themselves.
This prevents situations where followers are left with open positions, misalignments, or unintended risks. Follower Protection safeguards against discrepancies and enhances platform reliability by providing automatic synchronization between the leader and the followers.
How does it work?
When a leader closes their position and reaches a qty of 0:
The system detects that the leader has exited their position.
All linked followers are automatically synchronized to close their positions and reach a qty of 0, even if followers have adjusted their positions (e.g., partial trades).
This process ensures that followers do not hold positions that are no longer aligned with the leader’s strategy.
A practical example
With Follower Protection:
Leader Action:
The leader opens a long position in Mini Nasdaq 100 (Mini NQ) with a qty of 5 contracts.
Follower Action:
All followers replicate this action, opening a long position with a qty of 5 contracts.
One follower decides to take a partial profit, closing 2 contracts.
The follower now holds 3 long contracts, while the leader still holds 5 long contracts.
Leader Closes Position:
The leader closes their entire position, reducing their qty to 0.
With Follower Protection, the system ensures that all followers’ positions are automatically adjusted to a qty of 0, regardless of the follower's partial trade.
Result:
The follower’s 3 long contracts are closed in sync with the leader.
No unintended short position is created, and the follower’s portfolio remains aligned with the leader’s strategy.
Important to know when using Follower Protection:
If you use Follower Protection and you close a position on your lead account take into account you have to wait 1 second before placing orders or enter positions for them to be copied over, because we basically flatten all positions, not orders.
Without Follower Protection:
Leader Action:
The leader opens a long position in Mini Nasdaq 100 (Mini NQ) with a qty of 5 contracts.
Follower Action:
All followers replicate this action, opening a long position with a qty of 5 contracts.
One follower decides to take a partial profit, closing 2 contracts.
The follower now holds 3 long contracts, while the leader still holds 5 long contracts.
Leader Closes Position:
The leader closes their entire position, reducing their qty to 0.
Without Follower Protection, the system blindly copies the leader’s action and attempts to close 5 long contracts for the follower.
Result:
Since the follower only holds 3 long contracts, the system closes those 3 contracts and opens a short position of -2 contracts.
The follower is now misaligned with the leader and exposed to additional risks or potential losses.
Why is Follower Protection important?
This functionality provides several key benefits:
Risk Management: Followers are protected from unexpected losses by ensuring their positions are synchronized with the leader, even in cases of partial trades.
Efficiency: No manual intervention is required to monitor or correct follower positions.
Reliability: The system ensures accurate alignment between leader and follower accounts, minimizing errors or unintended trades.
Conclusion
With Follower Protection, we address critical risks in synchronized trading by ensuring full alignment between leaders and followers, regardless of adjustments made by followers. By automatically closing positions to match the leader’s actions, this feature prevents scenarios like partial trades leading to unintended positions or losses.
This reinforces our commitment to reliability, ease of use, and transparency, creating a safer and more efficient trading environment for all users.