No, What i meant is there is more to it than hard work. The majority of hard working traders continually lose money because they are working on fatally flawed ideas.
Yes, some traders are succeful due to random luck.
Surf
Topsteptrader
- Thread starter deaddog
- Start date
No, What i meant is there is more to it than hard work. The majority of hard working traders continually lose money because they are working on fatally flawed ideas.
Yes, some traders are succeful due to random luck.
Surf
I used to believe this, too. So cute.
so say the anonymous internet winners. Everyone is a winner on elitetrader. LFAO!
I posted on this thread a few months ago about why I believed TopStep was misleading people.
I decided not to waste my time going for it (even though I had previously been very excited about it and spent months planning a strategy to pass the combine)
Last time, I posted a very long post explaining my thoughts, but it was a bit messy because I was still trying to wrap my head around the issue.
Let me explain again, this time it should be quite obvious.
In other words, the maximum draw down you have allotted to your trading account is what dictates the size of your account. The rest of the money in the account serves no purpose, you might as well have it in the bank. (the only benefit it provides is letting you trade larger sizes, which is the dumbest thing to ever do if your account is small to begin with)
If you were willing to lose the full 100k, then your account was truly 100k. If you were only willing to lose 50k, then your trading account size is 50k.
Therein lies the rub/misdirection/'scam' of topsteptrader.
They get people excited with the possibility of "large" funded accounts.
"Wooo finally I can trade for a living with a nice sized account. No more undercapitalized rat race"
But they have a maximum drawdown policy of about 3%. At first glance, the trader finds this perfectly "fair", after all you gotta "prove yourself" with the account first.
But course what it ultimately means is that the account you are trading is only 3% as large as you think it is. When thought of this way, the picture turns ugly.
When your shelling out $300 a pop on combines with the rationale that it will be worth it in the long run if you can acquire the "150,000" funded account, it becomes much less enticing (odds wise) when you realize that those $300 combines might get you a $4,000 account (if you are successful. And even if you are successful, what exactly can you hope to ever do with a $4,000 account? You'd be much better off saving 25k of your own money and trading that once you have your system. Under-capitalization makes trading 10 times harder than it would be with a larger account)
Again think about it carefully. The size of your account for all intents and purposes, is dicated by how much money you are willing to lose.
Willing to lose 50% before calling it quits? Your $100,000 account is only $50,000.
Willing to lose 1% before calling it quits? Your $100,000 account is only $500
So topstep charges you between $50 to $350 to pass a tough combine for the chance to possibly trade a :
$150,000 funded account (in reality a $4,000 account)
$100,000 funded account, (in reality a $3,000 account)
$50,000 funded account, (in reality a $1,500 account)
$30,000 funded account, (in reality a $900 account)
$10,000 funded account. (in reality a $300 account)
When you think about it that way, it changes the risk-reward decisions when contemplating whether the money shelled out for combines are worth it.
I decided not to waste my time going for it (even though I had previously been very excited about it and spent months planning a strategy to pass the combine)
Last time, I posted a very long post explaining my thoughts, but it was a bit messy because I was still trying to wrap my head around the issue.
Let me explain again, this time it should be quite obvious.
- Imagine you have 100k in savings and decide your going to give trading a shot.
- You tell yourself "Trading is risky, so to be safe, if I lose 20k i'm going to call it quits"
- You deposit the 100k with a broker and start trading. You make some money, lose some money, but ultimately, you are down to 80k on your account.
- You close that account.
In other words, the maximum draw down you have allotted to your trading account is what dictates the size of your account. The rest of the money in the account serves no purpose, you might as well have it in the bank. (the only benefit it provides is letting you trade larger sizes, which is the dumbest thing to ever do if your account is small to begin with)
If you were willing to lose the full 100k, then your account was truly 100k. If you were only willing to lose 50k, then your trading account size is 50k.
Therein lies the rub/misdirection/'scam' of topsteptrader.
They get people excited with the possibility of "large" funded accounts.
"Wooo finally I can trade for a living with a nice sized account. No more undercapitalized rat race"
But they have a maximum drawdown policy of about 3%. At first glance, the trader finds this perfectly "fair", after all you gotta "prove yourself" with the account first.
But course what it ultimately means is that the account you are trading is only 3% as large as you think it is. When thought of this way, the picture turns ugly.
When your shelling out $300 a pop on combines with the rationale that it will be worth it in the long run if you can acquire the "150,000" funded account, it becomes much less enticing (odds wise) when you realize that those $300 combines might get you a $4,000 account (if you are successful. And even if you are successful, what exactly can you hope to ever do with a $4,000 account? You'd be much better off saving 25k of your own money and trading that once you have your system. Under-capitalization makes trading 10 times harder than it would be with a larger account)
Again think about it carefully. The size of your account for all intents and purposes, is dicated by how much money you are willing to lose.
Willing to lose 50% before calling it quits? Your $100,000 account is only $50,000.
Willing to lose 1% before calling it quits? Your $100,000 account is only $500
So topstep charges you between $50 to $350 to pass a tough combine for the chance to possibly trade a :
$150,000 funded account (in reality a $4,000 account)
$100,000 funded account, (in reality a $3,000 account)
$50,000 funded account, (in reality a $1,500 account)
$30,000 funded account, (in reality a $900 account)
$10,000 funded account. (in reality a $300 account)
When you think about it that way, it changes the risk-reward decisions when contemplating whether the money shelled out for combines are worth it.
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It would be interesting to know how many times you actually failed the combine.
Setting aside the snark attack, do you not think ResonanceFX has a point?
I've never taken the combine.
I was researching topstep stuff for a few months and really excited about it. Listened to all 100 or so funded trader interviews they have on youtube. I just got more and more excited listening to people talk about things like leaving their careers to join topstep, the victory speeches, people crying during interviews etc.
When I started getting into the serious gameplanning for the combine (what size should I trade with, my commision costs, # of times to trade, etc) that I realized the problem.
At first I didn't know if I was just mistaken in my thinking, but after a while it became pretty obvious I was correct. At that point the wind was taken out of my sails and I lost interest in pursuing it any further.
If you're going to compare the Top Step program vs. a retail account, then it's only fair to compare the true costs of trading live accounts, which includes not only the total amount of the draw, but also the minimum balance required to trade the account.
For example, let's say you want to open a futures account that requires a $1k minimum per lot intraday for crude, and you're starting with 2 lots maximum. The account you claim "in reality a $1,500 account," when passed and converted to a live account, is actually a $4,000 account, since you would require the $1k/lot minimum to maintain the account, PLUS your max draw of $2,000 in the live account. (I'm using AMP futures for comparison, since they require 1k per lot of crude minimum, and I'm using the maximum allowable draw on the "$50k live account" of $2,000, and a maximum allowable trade size of 2 lots).
If you pass the "$50,000 combine" on crude then you're in essence getting the equivalent of a $4,000 retail crude account. However, there are other factors to consider:
1. The costs of a combine vs. costs of blowing up a retail account when first starting out
2. The ability to trade larger lot sizes via the scale up plan, without having to place capital
3. The learning process of gaining the knowledge and discipline to trade in a more structured environment.
Let's say a guy gets to the 10 lot level on the scale up plan. The profit required to trade those larger lots is $7,000 to $10,000 on the "$50k live account." To trade 10 lots of crude with, say AMP Futures, you would need $10k minimum plus your maximum allowable draw. Let's say at that point you negotiate your total draw to $5k. Since your live account cannot go below the "zero" balance, that $5k is kept as the cushion.
Taking the high side of $10k of gains in the $50k live account, you could now trade 10 lots of crude, and if you want to maintain a $5k total draw, then in essence you now have the equivalent of a $15,000 AMP account with only $5k of capital in the TopStep live account.
If you're going to compare the front end, then you also have to compare the back end as well, using the true cost of capital if you went with a retail account instead.
Now, the caveat here is you are giving up 20%, whereas in a retail account you keep all of your profits, and you benefit with the 60/40 tax treatment of a futures account vs receiving a 1099 for ordinary income.
However, those factors aren't very relevant in the early stages of building up the account, but they would become relevant if you were able to start meeting the higher profit targets to scale up size.
You also have to consider any intangible benefits with trading with backed capital vs. your own capital when you start scaling up size, and any benefits you might receive by trading in a group with other like-minded traders, such as the private chat room reserved for live traders.
So I guess the question to ask yourself is this: do you want a chance to build up an account with very limited capital up front, and a lesser capital maintenance requirement to trade size?
If yes, then the combine is a way to get that account. If no, then just open up a retail account, and hope for the best.
I do agree that the labeling of a "50k account" is not an accurate representation of the live account. The actual account size is the total amount of draw in the live account. And when compared to a retail account, you also have to factor in the maintenance requirement.
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This is flawed logic. Swing around 20 lots on $4K? That's just $500 margin per lot! But even assuming that someone had access to that insane leverage (I certainly don't come close at I.B. nor do I feel the need for it), you need to also account for the maximum drawdown, which is another $4500. Otherwise, commission on entering a 20-lot trade alone would trigger a margin call. :eek:
So at the very least, the $150K combine would be somewhat equivalent to a $8500 account at a hypothetical broker offering $500/lot margin. Now, at a broker with more sane margin, say $1500-2500 depending on the contract, you're looking at more like $35K to $55K equivalency.
So while I agree that the "$150K" is purely for show, especially knowing that their true risk is around $4500 plus overhead, it's not nearly as inflated as you calculated. More like 3-5x, not 37x. It also has its use in my risk management: by risking 0.6%/trade on a hypothetical $150K I always end up with anywhere between 4 and 12-15 lots on my trades, so their 20-lot maximum sounds roomy enough. At least for me...