What is a Profit Deduction?
What happens if your trading platform doesn’t have enough money to pay out all the profits?
This can happen on any platform in the market.
But at DXS, we’re honest about it.
Other platforms can mess with prices and trade execution, or even block access to their platform with ‘maintenance’ or ‘server issues’, to reduce the amount that they need to pay out.
Did you change your name recently?
Yes! We used to be TDXP and we’re in the process of rebranding to DXS. We decided to make the change due to TD Bank Group contesting our TDXP EU trademark application.
Read this post if you’d like to learn more.
None of that happens at DXS.
Look at this:
This is the trading session box on the DXS app.
It’s a live display of the current 8 hour trading session — you can see there is 3h 49m to go.
The minimum amount of money available to pay profits is Session Liquidity.
Session Liquidity changes in real time, whenever a trade is closed.
If you lose in a trade, Session Liquidity goes up. If you close a profitable trade, it goes down.
By displaying Session Liquidity live, everyone can see how much money is available to be paid out in profits in real time.
Completely transparent trading liquidity.
You won’t find that anywhere else.
Why Do Profit Deductions Happen?
If there are more trading profits than losses (fantastic, we love it when you’re winning!) Session Liquidity shrinks. Sometimes, very rarely, it can go all the way down to zero.
Now, if session liquidity goes to zero, there isn’t any more money to pay out in profits.
So, what do we do?
We could just say ‘we don’t have any money to pay you’.
But that would mean that some traders get all of their profits, while other traders get none.
That just wouldn’t be fair.
So we came up with Profit Deductions, to deal with this situation more fairly.
What is it?
It’s an automated part of the DXS protocol.
If session liquidity goes to zero, there’s nothing left to pay profits. But some traders still have open trades in profit, so what happens when they close them?
The profit we can’t pay is a shortfall, and we share it around fairly by applying a Profit Deduction to all winning trades for the session.
That’s why we hold back profits until the end of each 8 hour session — to settle profits against losses and apply a Profit Deduction if needed. Your profit gets sent when this is all done.
Imagine 4 traders, each with a trade that’s $10 in profit. But we only have $30 to pay them.
There’s a $10 shortfall. Or 25% of all profits.
We could pay the first 3 traders that close their trades $10 each, but then the last trader to close would get $0.
We think that just isn’t fair. So we apply a profit deduction of 25% to every profitable trade, or $2.50 each.
Then we pay it back later, when we can — keep reading to see how this works.
It’s the fairest way we could think of to deal with the situation.
How does it work?
All profits from winning trades are held back until the end of the session, to be settled against Session Liquidity.
If there isn’t enough Session Liquidity, the shortfall becomes a Profit Deduction. It’s a % that gets applied to every profitable trade for the session.
In the Trading Session screenshot below, if the session ended like that there would be a 43.09% profit deduction from every profitable trade.
Where Does It Go?
Nowhere. It’s an amount that was never available to be paid.
But here’s the good news:
- you can easily avoid it.
- we’ll pay it back when we can,( with 28% interest !)
- we’ll reward you with loyalty tokens for the trouble
- it’s going to happen even less often with changes we are bringing in soon
How can I avoid it?
Don’t close a profitable trade when the Session Liquidity is negative.
That’s why we display Session Liquidity in real time — so you can avoid Profit Deductions.
And if Session Liquidity is going down fast, be careful.
Session Liquidity gets replenished every 8 hour session.
Wait until the next session and take profits then.
How do I get my deducted profits back?
This profit deduction is recorded in your Trade History on the app after the trade has been closed and settled.
Here is an example:
If you scroll down your Trade History, you can see any profit deduction recorded at the bottom:
Your Profit Deduction becomes a contribution to the 28th round of the Liquidity Pool.
You can read more about our liquidity pool here.
When the 28th round is opened, you’ll start getting paid like a liquidity provider — daily — until the amount is all paid PLUS 28%.
When the Loyalty Token is launched (early 2022), every trader with an existing or future profit deduction will receive 10 TLT Loyalty Tokens for every 1 BSV of Profit Deduction.
Profit deductions will happen less frequently in the future
It happens very rarely now.
Soon it will happen even less.
Because the Insurance Pool grows constantly from investment and platform operations.
Session Liquidity is funded from the Insurance Pool, so they both grow together. As Session Liquidity gets bigger, there’s less chance of running out of money to pay profits.
Also upcoming changes to the way the platform operates, such as the fiat denomination of trading positions which will help balance our order book, will reduce Profit Deductions even more.
In the meantime try to avoid it by keeping an eye on Session Liquidity while you trade.
And remember — you won’t find any trading platform that’s as transparent and upfront about liquidity as DXS.
It’s another way DXS makes your trading life better.