The High Water Mark (HWM) is part of the Performance Fee calculation in Social Trading. It links fee eligibility to new eligible net performance above a prior mark, but the current investment records and applicable terms govern any specific calculation.
Overview
Why We Use a High Water Mark
The High Water Mark is used to apply the published Performance Fee rule to new eligible performance. It does not guarantee an investment result or absolute fairness.
At the relevant fee event, the service compares eligible performance with the prior HWM. Recovery only up to the prior mark is not, by itself, new above-HWM performance; only the eligible amount above it may be considered.
The final amount also depends on the rate recorded for the investment, the fee event, previous performance, deposits, withdrawals and the investment lifecycle. The HWM does not guarantee the absence of a dispute, a record difference or other costs.
How the High Water Mark Works
The figures below are a simplified illustration of the HWM concept only. They assume no deposits, withdrawals or other changes and may not reproduce the fee for a real investment. Apply the rate, fee event and adjustments shown in the current investment record.
Step 1: Generating Profit
Your copied trades increase your total account value from 10,000 USD to 12,000 USD.
Result: Your High Water Mark is set to 12,000 USD.
Fee Action: A Performance Fee is calculated and applied to the 2,000 USD profit earned.
Step 2: Experiencing a Loss
Market conditions change, and your total account value falls from 12,000 USD down to 9,000 USD.
Result: Your High Water Mark remains fixed at 12,000 USD.
Fee Action: No Performance Fee is charged.
Step 3: Partial Recovery
Your account value grows from 9,000 USD to 11,500 USD.
Result: Although your account has generated net growth during this specific period, the total account value of 11,500 USD has not yet exceeded the previous High Water Mark of 12,000 USD.
Fee Action: No additional Performance Fee is charged.
Step 4: Reaching a New High
Your account value increases from 11,500 USD to 12,500 USD.
Result: Your High Water Mark updates to the new peak of 12,500 USD.
Fee Action: Only the new profit above the previous High Water Mark of 12,000 USD is considered for a new Performance Fee.
The step-by-step calculation for the new fee is as follows:
Current Account Value: 12,500 USD
Previous High Water Mark: 12,000 USD
New Profit Subject to Fee: 12,500 USD minus 12,000 USD equals 500 USD.
The Performance Fee is calculated only on this 500 USD net gain.
High Water Mark Timeline Progress
The progression of account equity, High Water Mark status, and fee eligibility follows this sequence:
Initial Milestone: Account Equity is 10,000 USD, the High Water Mark is set at 10,000 USD, and no Performance Fee is charged.
Growth Milestone: Account Equity rises to 12,000 USD, the High Water Mark updates to 12,000 USD, and a Performance Fee is charged on the growth.
Downturn Milestone: Account Equity drops to 9,000 USD, the High Water Mark remains at 12,000 USD, and no Performance Fee is charged.
Recovery Milestone: Account Equity recovers to 11,500 USD, the High Water Mark remains at 12,000 USD, and no Performance Fee is charged.
Peak Milestone: Account Equity reaches 12,500 USD, the High Water Mark updates to 12,500 USD, and a Performance Fee is charged exclusively on the additional 500 USD profit.
Important Considerations & FAQs
Does every profitable trade generate a Performance Fee?
No. One profitable trade does not determine a Performance Fee. The Social Trading service calculates it at the billing period or fee event recorded for the investment.
What happens after my account experiences losses?
Under the published HWM calculation, recovery only up to the prior mark is not, by itself, new eligible above-HWM performance. Check the current investment records; do not assume this removes any other applicable fee or cost.
Can I be charged multiple Performance Fees on the same profit?
The rule is intended to avoid counting the same eligible performance again. It does not guarantee that a dispute or record difference can never occur. If an amount cannot be reconciled, use the current fee and performance details to request a secure review.
Why do most Social Trading platforms use a High Water Mark?
A High Water Mark links Performance Fee eligibility to new eligible net performance above a prior peak. It is a calculation rule and does not guarantee investment results, absolute fairness or a particular final amount.
For a specific investment, review the recorded Performance Fee rate, billing or fee history, displayed performance and applicable terms. Do not assume a later displayed rate change applies retroactively. If the records cannot be reconciled, submit a secure ticket with the investment or fee ID, date, time and a redacted screenshot.
Related information: How do Social Trading performance fees work?; How do I set up my trading signal?