Real Profits First, Performance Fees Second [High-Water Mark Principle Explained]

Market commentary

The high-water mark principle ensures fairness in performance-based fees by charging only when an account's value surpasses its previous peak. If the account experiences a loss, no fees are applied until the losses are fully recovered, protecting clients from paying during underperformance. This approach aligns incentives, ensures fees reflect genuine gains, and fosters transparency, making it a trusted standard in ethical investment management.

One of the main aspects Algocrat AI clients appreciate about the product is that they only pay if they have already achieved profits.

Unlike most products on the internet, there are no upfront fees, management fees, subscription fees, or any cost until profits are realized.

Clients simply pay a portion of the profits after they have received them.

To ensure this, we use the high-water mark principle to calculate the performance fee.

How does it work?

In simple terms, the high-water mark principle ensures that a manager (in this case, the Algocrat AI team) only earns performance fees when the account’s value surpasses its previous peak, or “high-water mark”.

If the account’s value drops, we must first recover these losses before earning additional fees.

This protects our clients from paying extra fees if the overall performance is down.

The high-water mark principle concept is illustrated in the following image:

In this image, the light blue area represents periods where the account balance is below its high watermark, meaning that no performance fee is charged.

Once the balance exceeds the high watermark, a performance fee applies to the gains above this threshold, as shown by highlighted portions of the graphic bars.

Why is this the most convenient pricing structure for you?

It’s straightforward: real profits first, performance fees second.

This may not be the usual approach for those accustomed to trading, Expert Advisors, signals, and copy trading, but it’s the most honest way of doing things.

We make a profit for you, and you share a portion of it with us - a win-win scenario.

In most cases, that's not how things work. With EAs and other similar products, people typically pay an upfront fee and then attempt to recover it through trading.

This creates a conflict of interests between the client and the developer.

With Algocrat AI, your interests are perfectly aligned with ours.

Clients only make money when we do, which is why we do our best to ensure positive and consistent results.

Best regards,
The Algocrat AI Team

Published on Nov 19, 2024

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Nature of Business Disclaimer

Algocrat.ai operates as a technology provider offering Software-as-a-Service (SaaS) solutions for automated trading strategies. We do not provide financial or investment advice, portfolio management, brokerage services, or act as a financial intermediary. Users retain full control over their trading accounts and funds, and all trading activities are conducted at their own discretion and risk.

Earnings & Risk Disclaimer

Trading digital currencies on margin has large potential rewards but also carries a high level of risk. You must be aware of the risks and be willing to accept them to invest in the digital currencies markets. Don't trade with money you can't afford to lose. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website. The past performance of any trading system or methodology is not necessarily indicative of future results.

SIMULATED OR HYPOTHETICAL PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE THE RESULTS SHOWN IN AN ACTUAL PERFORMANCE RECORD, THESE RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, BECAUSE THESE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THESE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED OR HYPOTHETICAL TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE BEING SHOWN.

NO REPRESENTATION IS BEING MADE THAT ANY PERSON WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

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