totally agree.
But for the trader profitability is his only concern and he has a lot of hurdles to overcome in this scenario. I would say that any trader who walks down this path is by definition a bad trader.
Some traders statistics about prop firms
- Thread starter wmwmw
- Start date
totally agree.
But for the trader profitability is his only concern and he has a lot of hurdles to overcome in this scenario. I would say that any trader who walks down this path is by definition a bad trader.
How did you make your pile if you're not as good a trader as people think you are?
Not speaking for him just expanding on my earlier comment:
#1 Not saying all of course. But a lot of traders have multiple successful businesses, so when they trade there mind is clear and free of stress, the outcome to them is almost irrelevant allowing them to be patient and trade better (generally speaking). Where as someone else who is new to trading or relying on trading as main source of income, in some cases it might as well not even be the same thing(trading).
#2 Some traders have large accounts relative to the size they are trading. They will just buy the dip, wait buy the dip again on any bounce peel some off. Rinse and repeat, essentially building a net weighted average. Than they will post showing a few of the trades and how well they caught the move and understand the markets. When they basically we're just trading like a market maker or larger player, using essentially brute force as their edge.
Nothing against #1 and #2 they deserve it and it can be a very intelligent way to generate consistent income. Again, the issue I take is when they try to pass it off as direct trading skill and teach new traders and than either leave out (or maybe worst yet) not even understand why they are truly profitable. So, now the new trader will potentially follow whatever concept, indicator or "edge" that the person tells them they use, thinking it is a large factor in his success, when in reality it's other thing he did that give him the mental advantage and/or it's his account size that is providing the true edge, not any type of alpha or necessarily directly relating to actual trading.
EDIT: To be fair I basically brute forced the market yesterday with my short since I had so many profits, I just held into the rally. However, that was on a very small account size and I used the profits I had early due make a judgement call, so don't necessarily consider it the same thing. But I did do it, so not throwing stones. Just saying don't like how people mislead new traders.
Their business model described in one sentence.
While I think you're right that most cannot, it's actually not super hard. The problem I had to solve for myself before I got to this point was to recognize when to trade and when not to trade.
Consistently profitable traders would not be likely to open an account at Myforexfunds.com or similar places. Those numbers probably over represent failed traders.
Well I would change that statement a little to consistently profitable trader who do not have a direct edge related to trading and/or and edge that is related to alpha. There is no reason for them to open up any type of prop firm account, as it takes away their main edge (which is generally speaking draw down and/or having other businesses that generate considerable net income, allowing for a mental edge of not needing to trade, therefore no rush and that generally means you perform a lot better). Again, would not make any sense in that regard for them to open up a prop firm account, when they are already flush with capital.
Ultimately agree with your statement, just wanted to add my view in there.
If you guys watched the video then the facts the video provided clearly indicates there have been large number of consistent traders stay in their live funded accounts.
I will take November number as example(Oct number was abnormal):
Fact 1:November only 3-4 traders reached first profit split, assume average account size is 100000, and their profit average 10%,so their payout is 100000X10%75%, so they receive at maximum 30000 total payout.
Fact 2:MFF November total payout was 2.8 M.This means the 2.8 M was almost all paid to existing funded traders who received payout every month.The total payout amount suggest there are a few hundred traders stay in funded status and received payout every month. If most traders who reached first profit split are not consistent traders, you would expect only a small number of traders who can stay in funded status, since every month new traders came in, and old traders blow up their accounts and came out.
I will take November number as example(Oct number was abnormal):
Fact 1:November only 3-4 traders reached first profit split, assume average account size is 100000, and their profit average 10%,so their payout is 100000X10%75%, so they receive at maximum 30000 total payout.
Fact 2:MFF November total payout was 2.8 M.This means the 2.8 M was almost all paid to existing funded traders who received payout every month.The total payout amount suggest there are a few hundred traders stay in funded status and received payout every month. If most traders who reached first profit split are not consistent traders, you would expect only a small number of traders who can stay in funded status, since every month new traders came in, and old traders blow up their accounts and came out.
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I dont really have a problem with these statistics--it just shows that most people have not developed a consistently profitable way of trading (nor have they developed a risk management plan that works that they actually follow) which is why even after passing the challenge(s) whether they are 1-stage and pass or 2 stages and pass-- and being "funded" with a live account-- most still blow up their live account. Most of the ones that are passing the challenges are doing so because of random luck and not a proven trading system and risk mgt which is why their brief success is not repeatable and more than likely they would have lost their money whether it was a self funded account or a trading challenge account
As far as the Funding/Challenge Firms business model--no problem with that as well except for a couple of things:
1) Funding/Challenge Firms that use trailing drawdowns should be avoided at all cost in my opinion. Right there that eliminates about 90% or more of all funding companies as they use trailing drawdowns which no matter how they are constructed are always most unfavorable to the trader. The worst offenders are those firms that take it 1 step further and factor any unrealized profits for setting the high watermark on where the trailing drawdown occurs from. Meaning as an example you are using a firm that has this kind of model that factors unrealized profits into the trailing drawdown and lets say your trailing daily drawdown is $5,000. Your starting balance day 1 is $150,000 during the day your trade positions at one point were $8,000 in profit but you chose not to close out your trades and instead while the session is still live you closed out with $3,500 in profits--now your balance is $153,500 however your high watermark for the trailing drawdown is $158,000 so actually your "fail" is now if your balance drops below $153,000. You take some more trades during the session which are losers and you end the day with a profit of $2,900 and a balance of $152,900 however you have "failed" because you violated the $5,000 trailing drawdown from $158,000 to $153,000.
The only realistic drawdown model from Funding/Challenge Firms that emulates the same as opening a trading that account your fund yourself is a fixed drawdown model (both daily drawdown allowance below zero line as well as total account max loss allowance below the zero line). That model allows you to withdraw all profits and still have full funding over and over. Lets take the same example from about except this time we use the fixed drawdown model and lets say your fixed daily drawdown is $5,000. Your starting balance day 1 is $150,000 during the day your trade positions at one point were $8,000 in profit but you chose not to close out your trades and instead while the session is still live you closed out with $3,500 in profits--now your balance is $153,500 (you now have an $8,500 cushion still left during the same session with this fixed drawdown model because you have your $3,500 in closed profits PLUS the $5,000 fixed drawdown below the zero line. You take some more trades during the session which are losers and you end the day with a profit of $2,900 and a balance of $152,900. Your account is still active. Lets say this is a "funded account" - you do nothing else and make a withdrawal request of all $2,900--the firm pays you your % of the $2,900 and takes their cut for the remining. Then the following day you still have a drawdown available of the full $5,000 --the same as when your account started day 1.
2) Funding/Challenge Firms that have a clause that eliminates/removes the drawdown in funded accounts once you have generated a specific level of profits--those firms should also be avoided at all cost in my opinion. This type of clause means that once you have generated "X" amount of profits they eliminate the drawdown meaning they eliminate their funding of your account and essentially eliminates all risk to them because now the only cushion for trading that you have from that point forward is how much of your own profits you choose to leave in your account--at that point you are simply trading your own money from that point forward but still paying the firm a percentage of your profits.
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Is it true that more than 90% of traders fail day trading? We often hear stories about successful traders, but most of the people who tried it failed. It’s sad but true, making me doubt I want to get involved.
Right now, I am trying to learn about prop firms as much as possible to choose the best one. I want to try working for someone before moving on to be on my own. This way, I would be able to learn more about the industry from the inside without risking losing that much. I hope the time I spend working for a prop firm will help me understand whether I want to be a trader or not.
Right now, I am trying to learn about prop firms as much as possible to choose the best one. I want to try working for someone before moving on to be on my own. This way, I would be able to learn more about the industry from the inside without risking losing that much. I hope the time I spend working for a prop firm will help me understand whether I want to be a trader or not.