investing

Social investment networks the new craze?

ZuluTrade was founded in 2006. Like the other sites, the website has an easy-to-read dashboard that shows the traders available to be followed, known as signal providers. Investors can compare them based on statistics such as return on investment, maximum drawdown, the number of dollars following them and number of followers.

ZuluTrade provides the framework for following signal providers, but investors must sign up for an account with one of the brokerage partners.

Account minimum

The minimum account balance varies between brokers, but the ZuluTrade website recommends a $15,000 minimum for standard accounts and $500 for mini accounts.

Types of investments available

Only currencies through forex are traded on ZuluTrade.

How much does it cost?

"There is no cost for investors for using ZuluTrade. It is totally free," says Kollias. "ZuluTrade is compensated by the collaborating brokers." The trading costs and commissions vary among currency pairs traded and from broker to broker.

Investors don't have to worry about paying the signal providers either. They are compensated by ZuluTrade. "Signal providers are compensated by ZuluTrade for each traded lot that is copied on a follower's account, with the exception of the U.S., where signal providers are compensated on a variable monthly membership fee scheme," Kollias says.

Risk management

ZuluGuard, the proprietary risk management system, monitors the trading behavior of the trade leaders. If a trade leader abruptly changes their trading patterns or just performs really terribly, ZuluGuard closes the open positions following that signal provider, takes that trader out of the investor's list and replaces it with another one.

There's also a risk meter bar that illustrates the amount of leverage used. By moving the bar, investors can allocate the number of contracts to trade with each signal provider. It indicates the amount of capital that will be at risk in the worst-case scenario based on the historical data of the trade leader.

"In other words, the risk meter bar calculates the worst past performance of the trader that the user has chosen to follow and by comparing this to the user's settings and equity, shows the maximum amount of the user's equity that will be at risk should this performance occur again," Kollias says.

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