High watermark is the highest level that an investment fund or an account has reached. Mulder FX uses a high watermark policy to calculate the performance fee.
An example:
A client opens an account and deposits 10.000 euro, after one quarter the account grows to 14.000 euro. A 40% fee will be paid over the 4000 euro profit, the 1st quarter closes with 12.400 In the second quarter a loss is made and the account drops to 10.000, no fee is charged. In the 3rd quarter a profit is made and the account grows to 13.400 euro. The performance fee will be charged over the profit (12.400-->13.400=1000 euro) from the high watermark. In the 3rd the client is charged a 40% * 1000 = 400 euro performance fee. The final balance of the third quarter is 13000 euro. The new high watermark is 13.000 euro.