What is a Trading Strategy?
A Trading Strategy is an investment solution for those who are looking for speculative investments but lack the expertise or the time to implement and manage such investments themselves.
Saxo Bank has pre-selected a small number of Trading Strategies ran by human beings – whom we call Strategy Providers - and designed a fully automated solution for you to invest alongside your chosen strategy (or strategies) and keep you in control in a fully transparent way.
What is SaxoSelect?
SaxoSelect is a fully digital and automated trading and investment service that enables clients of Saxo Bank to invest in pre-selected strategies directly from their trading platform.
SaxoSelect offers two main types of strategies: Investment Portfolios for the long term investors and Trading Strategies for the more risk-willing and experienced investors.
How do I start investing in a Trading Strategy?
Investing in a Trading Strategy is like investing in a fund: pick your strategy, click “Invest” and follow the online instructions to complete the investment. The funds to be invested will be transferred from your main account to the newly created investment account automatically when you complete your investment. You remain in full control of your investment accounts at all times.
To invest in one of the strategies you must have a live and sufficiently funded account with Saxo Bank A/S.
Are Trading Strategies available for everyone?
Trading Strategies are classified as a high risk investment proposition and as an investor you need to show that you are a suitable investor for the service before you can begin trading. According to EU legislation you are required to take a MiFID suitability test to which you will be prompted to take online during the initial investment process.
Do I need to open a new account to invest?
No, that is not required.
When you complete your investment in a Trading Strategy, a sub-account dedicated to that strategy will automatically be created under your existing Saxo Bank account. This means that with the same unique login, you can view and control your main trading account and your automated investment accounts. It’s that easy!
How can I protect my investment?
Saxo Bank has designed a stop out mechanism – which we call Investment Shield - so you can protect the value of your investment. You define the value of the Investment Shield in the investment ticket before you complete your investment.
For example, if you invested USD 20,000 in one strategy your investment shield is set by default at 70% of the value of the initial investment (i.e. USD 14,000). You may amend this value if you wish but the investment shield cannot be set higher than 90%. Should the value of your investment account subsequently fall below the value of the Investment Shield all positions will be closed at market price and the link to the strategy will be broken.
The Investment Shield is designed to limit potential losses, but it is not a guarantee that you can only lose the pre-defined amount specified by you. Please note that the triggering of the investment shield of one strategy will not impact your main trading account or other automated investment accounts as these accounts are treated separately for margin purposes. The value of the investment shield is fixed at the level you set and therefore does not fluctuate with the value of the account. However, you can modify the value of the Investment Shield with the “Manage” button available next to your investment account in your platform.
How does SaxoSelect work?
Saxo Bank A/S has developed best-in-class technology that detects trades executed by the Strategy Provider on their account. The detection of a trade triggers our software to create a block order that combines all the individual clients’ orders invested in that particular strategy. Therefore, the trade execution will be proportional for the investors within each chosen strategy. Saxo Bank does not exercise any discretion in connection with the purchase or sale of securities but only automatically executes the trades carried out in respect of a strategy.
Why is it important that my order is executed in a block order?
When following a given strategy we believe it is important that all the investors should be treated equally as possible investment wise. To achieve this we have developed a technology that enables Saxo Bank A/S to execute the orders of individual investors in the same strategy in one single order. In this way your order will be treated simultaneously with the other investors’ orders that are following the strategy. Please note that this does not apply to orders at the time of your initial investment, where your orders will be executed individually.
Where can I monitor my investments?
You can monitor your investments from your platform, manage your Investment Shield, stop or restart an investment and transfer funds in and out of each of your investment accounts.
Can I stop my investment at any time?
You can stop investing at any time in a given strategy by simply pressing on the “Stop” icon next to the strategy in your platform.
When you decide to stop investing in a strategy, you will be given the choice of either keeping your existing positions or closing all positions which is the default option. If you decide to close all open positions at this stage, market orders will be generated. Should the underlying markets be closed these orders will be executed as soon as the markets re-open.
Remember that if you decide to keep open positions it is your own responsibility to manage them. You will have to close the positions yourself as the link to the strategy will be broken immediately after you have pressed the “Stop” icon.
Can I experience the service in a demo environment?
Unfortunately the service is not available in demo.
How are the Trading Strategies selected?
Each strategy is put through a stringent due diligence process where all aspects of trading, risk management and money management are taken into account. We also focus on the people trading the strategies and how scalable the strategies are for other investors to follow.
Only real money accounts are considered, so no demo accounts. Despite the care taken in the selection process, please note that the service remains a high risk investment proposition as each strategy operates with leverage due to the use of margin products and a high degree of discretion and exposures towards single securities and asset classes.
Can I trust the performance statistics of the strategies?
The statistics describing each strategy are based on actual trading data from real money accounts. Performance returns and drawdown statistics, for example, are calculated on the account value, thereby taking into consideration both closed and open trades. Statistics are calculated as per end of previous trading day data. It should be noted that the statistics show past performance and are not necessarily indicative of future results.
Can I restart an investment after I have stopped?
If you decide to stop an investment, you may reactivate your investment using the Restart button which is clearly marked in your platform. You will be required to confirm that your financial situation has not materially changed since you last invested and you will need sufficient funds available to cover the minimum capital required.
Can I close single positions in my strategy account?
So long as your investment is active, it is not possible to reduce or increase risk exposure at the single position level in your dedicated investment account.
An investment in a Trading Strategy should be considered as a standalone investment proposition. Either you are in or you are out.
Do the Strategy Providers see my investment and do they manage my funds?
No, they do not have access to your account nor do they know how many investors or how much capital that follows the strategies. The Strategy Providers only focus on their own trading and accounts.
What are the costs related to SaxoSelect?
Commissions and spreads will be retail prices or better. Additionally, Saxo Bank A/S will charge a Service Fee and a Performance Fee subject to a standard High Water Mark. The details of those Fees are shown on the strategy description page as well as on the investment tickets (for further information please see How is the Performance Fee calculated?).
Why is there a Service Fee? How is it charged?
The Service Fee covers the costs incurred by Saxo Bank A/S in the provision of the SaxoSelect service, such as IT maintenance, operational overheads and risk. The Service Fee is priced at the annual rate of 0.5% and charged on a quarterly basis. It is accrued on a daily basis and calculated on the balance of your investment account at the end of each day.
How is the Performance Fee calculated?
Saxo Bank A/S retains 20% of realized and unrealized net profits that are generated on your investment account. The performance fee is subject to a High Water Mark (see High Water Mark – how does it work?). It is not refundable if the strategy loses money in subsequent periods. If you have invested in several Trading Strategies a performance fee calculation will be applied to each dedicated investment account independently.
A client invests 20,000 EUR on 1st April
Starting account balance is 20,000 EUR.
Service Fee = 0.5% p.a., payable quarterly in arrears.
Performance Fee = 20% of net profits, payable on quarterly basis and subject to High Water Mark.
Starting High Water Mark
High Water Mark = Account Balance on 1st April = EUR 20,000
The service fee is calculated every day.
The daily service fee amount is calculated according to this formula:
End of Day Account Balance * (Service Fee Percentage / 365)
The fee for the first day is calculated as follows: 20000 * (0.005 / 365) = EUR 0.27
To simplify the example we assume that the account value remains at EUR 20,000 for April (30 days), EUR 21,000 for the rest of the quarter (May and June = 61 days)
With these simple assumptions the accrued service fee for the quarter can be calculated as follows:
(20000*(0.005*30/365)) + (21000*(0.005*61/365)) = EUR 25.76
Please note that the actual figure may vary slightly due to rounding.
The strategy has generated a profit of 1,000 EUR at the end of the quarter
Account balance is 21,000 EUR at the end of the quarterly period. Profit = 1,000 EUR
The performance fee is calculated at the end of the period
Since the current account balance is above the current High Water Mark, Saxo Bank A/S will charge a performance fee.
The performance fee is calculated according to this formula:
(Net Balance – Accrued Service Fee) * Performance Fee Percentage
(1000 – 25.767) * 0.2 = EUR 194.85
The net balance figure is the difference between the beginning of period account value and end of period account value, net of incoming and outgoing fund transfers.
Account situation at the end of the quarter (Client account*):
Beginning of quarter account balance
P & L
End balance before fees
End of quarter account balance
*all figures in EUR
The new High Water Mark is now EUR 21,000 for this account. This is the reference value for the calculation of the next period’s performance fee.
High Water Mark – how does it work?
The High Water Mark is the highest end-of-period (in our case quarterly) historical value of your investment in a given Trading Strategy. The High Water Mark principle ensures that you do not get charged twice for the same performance.
High Water Mark
In our above illustration the return in Q1 (EUR 1,500) to which the performance fee is applied is net of the service fee, so the investor only gets charged a fee for the performance over and above all other fees and commissions applied to the investment account. Service fees charged for the periods with no excess return will be deducted from the performance of the periods where excess returns have been produced before the performance fee is calculated.
Will I be charged fees if I stop my investment in-between quarters?
If you stop your investment outside of the exact dates of the fee schedule your investment account will be charged for the accrued value of applicable fees. For calculation purposes, the High Water Mark will be set on the day you stop the investment.
How is the performance of a Trading Strategy calculated?
Trading Strategies show a percentage performance calculated as a time-weighted performance. This calculation methodology is a standard methodology for comparing investment portfolio managers from the asset management industry. Performance is based both on realized and unrealized trades and removes the effect of funding operations.