Topsteptrader

[tortoise]

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...

Lots of brokerages offer $500 margin. That aside, understand the "$150k combine" isn't real money. It's a practice account. They're not extending you anything!

Once you get "funded," they start you out with an account that, by your reckoning is equivalent to, $3k-to-$4.5k max.

I guess if you're a homeless person who's a master trader that could be an attractive proposition. Beyond that, I don't get it, either.

 

[VPhantom]

Once you get "funded," they start you out with an account that, by your reckoning is equivalent to, $3k-to-$4.5k max.

You're underestimating again: 3 lots at say $2K/lot margin is already $6K, plus the $4500 max drawdown room, so actually the initial level funded is roughly equivalent to $10K. (In my case, I.B.'s initial intraday margin on NQ is $2250, even.)

However, this also largely depends on your risk management. I cap risk at 0.6% of capital per trade and leverage the underlying at 10:1. Thus on my personal trading account, I would never trade more than 2 lots, usually 1 and often stops are too wide and I'd have to pass on trades entirely, whereas the "$150K" combine's live trading, regardless of what it's actually comparable to in capital, already starts at 3 lots and ramps up to the full 20 on merit.

So with my conservative risk management (compared to most, apparently), TST could offer me an advantage from the start, because to me it's safer to give them a 20% cut while I ramp up in size, knowing they won't charge me drawdowns or critical execution mistakes, than to allow myself higher risk and leverage and hope to be lucky. There's no way I'd take on 3 lots in my account, even though I.B. would gladly let me trade 6. Now, with an account 5-10x the size of mine, then I wouldn't bother with TST. For reaching that size, I prefer TST's forgiving structure to risking a blown account on my own.

 

[tortoise]

You're underestimating again: 3 lots at say $2K/lot margin is already $6K, plus the $4500 max drawdown room, so actually the initial level funded is roughly equivalent to $10K. (In my case, I.B.'s initial intraday margin on NQ is $2250, even.)

However, this also largely depends on your risk management. I cap risk at 0.6% of capital per trade and leverage the underlying at 10:1. Thus on my personal trading account, I would never trade more than 2 lots, usually 1 and often stops are too wide and I'd have to pass on trades entirely, whereas the "$150K" combine's live trading, regardless of what it's actually comparable to in capital, already starts at 3 lots and ramps up to the full 20 on merit.

So with my conservative risk management (compared to most, apparently), TST could offer me an advantage from the start, because to me it's safer to give them a 20% cut while I ramp up in size, knowing they won't charge me drawdowns or critical execution mistakes, than to allow myself higher risk and leverage and hope to be lucky. There's no way I'd take on 3 lots in my account, even though I.B. would gladly let me trade 6. Now, with an account 5-10x the size of mine, then I wouldn't bother with TST. For reaching that size, I prefer TST's forgiving structure to risking a blown account on my own.

Our risk management is roughly the same (although I don't understand why anyone trades a small account at IB, but that's another story). But I wonder if we're still talking past each other, re: the $150k combine. This is a practice account. Period. When you go live, you're going live with 1 or, maybe, 2 contracts, period. But you will have already spent $375 per month for a minimum of two months (unless you pass the combine on the first go; few do). That's drawdown, isn't it? And I read of folks who gone through the combine five or ten times before passing. Holy smokes. That's a business model!

 

[ScalperJoe]

"re: the 150k combine."

Personally, I don't think the 150k combine is the best value, UNLESS you are quite confident in your plan and will scale up size to reach the profit targets faster (max lot size is 3 to start in the live account).

If it takes you two months (as per your example), then yes, it's at a cost of $750 ($375 x 2) during the combine. If it's taking someone "five or ten" combines to pass the 150k, then it's probably more efficient to "downgrade" the combine to the 50k after the first few attempts, and save on the monthly combine fees, while reducing the required profit target.

When you go live on the "$150k account" it's capped at 3 lots to start, which is the equivalent of a $7,500, 3 lot crude account with AMP ($1k maintenance per lot plus the $4,500 draw).

However, one thing that hasn't been brought up is the amount of the draw WITHIN the first ten days. Since you have to be net positive above the "zero" starting balance after ten days of trading live to continue, it's unknown and unclear as to how much the backer will allow you to drop if you start out negative. My guess is it's subjective and up to their discretion.

As stated in a prior post, the key is not the combine, it's passing through the live account after 10 days of trading, by maintaining the 50% winning day ratio, not taking the max stop on any given day, AND coming out net positive after the 10th day.

 

[VPhantom]

I don't understand why anyone trades a small account at IB

I don't at the moment. But for stocks, which was the reason I opened it originally, they're by far my favorite in Canada, especially now that they have RRSP/TFSA accounts which might come in handy soon. For futures, when I looked into them a few years ago, none of the decent brokers allowed accounts from where I am (QC, Canada) so that was that. No longer interested in CFD bucket shops.

re: the $150k combine. This is a practice account. Period. When you go live, you're going live with 1 or, maybe, 2 contracts, period.

You may not have seen their latest live trading rules then, because the maximum size from the start is explicitly mentioned as 3 lots, which ramps up to 20 as your total "lifetime" profits accumulate. (I phrase it like that because that number doesn't go back down if you withdraw some - but I assume it is reset if you ever draw down below zero, which sends you back to a combine.) I do think it's excessively protective, given that the combine just demonstrated what you can do with a full max of 20 lots, but it is what it is.

But you will have already spent $375 per month for a minimum of two months

I agree, I don't know why anyone would do that. Paying a monthly fee for simulated trading? I can spend less than $100/month on Sierra Chart and full data feeds to simulate live markets as much as I want. Heck, I currently spend a whopping $27/month because I don't need for my simulation to be on today's action, I just need it to be real-time, so I replay recent markets. I'll take a 10-day combine if and when my TST-optimized plan proves itself enough to my taste in this cheap learning environment. The 10-day fee is a one-time fee as long as you respect the risk management rules, which I happen to be very comfortable with.

My guess is it's subjective and up to their discretion.

From their help section, the maximum daily loss is the same in live trading as it was in the corresponding combine, it's not subjective. The maximum drawdown is simpler: don't let the account balance drop to zero. I also have a note (not sure if it's from the site or an interview) that maximum size and drawdown can be negotiated up after a track record is established live.

Anyway so basically, max daily drawdown, and keep enough balance to accomodate your expected overall drawdown. They're basically reducing their risk to nothing, but until I can swing around 20 lots in my personal account comfortably, they remain a viable option despite those rules.

While I don't mind the max daily drawdown one bit (I only take 0-4 trades per day and adjusted my risk size accordingly), I do agree that the "over 45% winning days" is going to be interesting to deal with.

 

[ScalperJoe]

Paying a monthly fee for simulated trading? I can spend less than $100/month on Sierra Chart and full data feeds to simulate live markets as much as I want.


From their help section, the maximum daily loss is the same in live trading as it was in the corresponding combine, it's not subjective. The maximum drawdown is simpler: don't let the account balance drop to zero. I also have a note (not sure if it's from the site or an interview) that maximum size and drawdown can be negotiated up after a track record is established live.

Anyway so basically, max daily drawdown, and keep enough balance to accomodate your expected overall drawdown. They're basically reducing their risk to nothing, but until I can swing around 20 lots in my personal account comfortably, they remain a viable option despite those rules.

While I don't mind the max daily drawdown one bit (I only take 0-4 trades per day and adjusted my risk size accordingly), I do agree that the "over 45% winning days" is going to be interesting to deal with.

Regarding a simulated account, you can get the TST sim for $35/month with charts before doing a combine, with real time data feed, which seems a lot cheaper than whatever Sierra would charge for the same service.

Regarding the drawdown in the live account, I was referencing the first 10 days only, where the balance has to be above the "zero" balance. They aren't "reducing their risk to nothing" if you are in a draw without breaking any of the rules within the first 10 days of the live account.

My point was if you're in a draw on day 1 or day 2 in the live account, is there any discretion regarding the total allowable draw. In other words, will they run the full $4,500 risk within the first 10 days on a "$150k live account", or limit your trading after a few days if you start out negative.

Yes, I understand that after 10 days your account has to be above "zero" to continue trading, and at that point as you build your profit cushion, they are "reducing their risk to nothing" since you cannot go below the "zero" balance ever again. However, it's only their "cash risk" of the maintenance that is reduced to nothing, but not the profit risk, since if you were in profit and then dropped to zero without cashing out, they would lose their potential 20% of whatever profits you initially made in the live account.

 

[VPhantom]

you can get the TST sim for $35/month with charts before doing a combine, with real time data feed, which seems a lot cheaper than whatever Sierra would charge for the same service.

Oh, I mistakenly remembered it to be 10x that amount. That said, it's not too much more expensive at SC if you have a broker it can connect to once a month to unlock the lower tier of retail data pricing from the CME. $55/month for SC real-time and another mere $3.25 for the CME data, so $58.25.

Funny, I keep looking for their monthly fee on their web site but all I see is that the first 14 days are free, not how much it costs thereafter. Maybe the Help section? Hm can't find it there either... Do you by any chance remember where you saw that $35 being mentioned?

My point was if you're in a draw on day 1 or day 2 in the live account, is there any discretion regarding the total allowable draw. In other words, will they run the full $4,500 risk within the first 10 days on a "$150k live account", or limit your trading after a few days if you start out negative.

Ah! The rules mention both daily and weekly limits for the first 10 days, so I would be quite surprised if they cut me off after just a couple of initial loser days if within the weekly limit. Defeats the purpose of accumulating 10 days of data. That said, the combines have daily loss limits and a maximum absolute drawdown but no weekly loss limit. They don't disclose the amount of that weekly limit anywhere... You may be on to something. I had incorrectly misread that it would be $4500 (combine's max) but it could be anything. I'm making a note to ask them about that before signing up. Thanks!

And I agree with your correction, they do take on some risk in the initial 10 days. That's actually why I tolerate the small live initial 3-lot size: my own risk being limited to the combine's one-time fee is the main bait I'm after. That gives me a heck of a lot more staying power while I mature as a trader.

 

[VPhantom]

Mea culpa. The devil's in the details.

I missed this until right now, from the scaling plan page:

Once your account balance is greater than $10K, you can request more buying power.

(And here I assume that such an increase in size would also include a matching increase in max daily loss.) So clearly, if one enters a combine above the $30K level, it's not for gaining access to size, it must be for some other reason...

I ran a spreadsheet which implements their scaling plan with multiple scenarios, and the difference in balance growth (assuming a constant return per lot) is astonishingly small the way the higher combines are throttled down. For example, in a scenario in which the $150K combine exceeds +$10K in 8 weeks, the $30K does so in 13 weeks. So here again they offer no real advantage over the $30K...

However, they don't say that the maximum daily losses increase along with maximum allowed size, so I have to assume they don't. That completely cripples the $30K's live trading: I'd be stuck at 1-2 lots (even when allowed more) in live trading, to stay within -$500/day on 3 losses on a bad day!

Other worthy distinctions everyone already knows:

• the $30K has an easier $500/lot profit target (vs $600/lot for the other 3)
• the $30K has a more relaxed $500/lot max drawdown (vs $400-300 for the other 3)
• but the $30K has a harder $167/lot max daily loss (vs $200 for the other 3)
• in all 4, the target is 3x the daily loss limit.

Favoring the $30K yet again, on their trader rules page:

Those who successfully complete the $10K or the $30K Combine will NOT have a Weekly Loss Limit as a Funded Trader

Last but not least, the 45% profitable days is not part of the target, but part of the rules you must not violate in order to have a refund or rollover. Failure to reach 5 profitable days means you have to buy multiple entries. That's very annoying. I thought only the risk and schedule rules had to be met to get free rollovers or a refund.

I guess I should either request a custom $30K combine with a daily loss limit tripled to match the overall drawdown limit, or go $150K to have all the drawdown room I need live, and tolerate a mysterious weekly loss limit. (In both cases, TST grows 5-10x faster than my stand-alone account, so even with the risk of buying multiple entries, it remains useful in my situation.)

 

[ScalperJoe]

VPhantom,

Some points to consider:

Regarding SC vs. TST, why would you pay more for a sim account when the trades don't count? Unless you really like the charts and the ease of connection with your existing broker, I guess it's a matter of preference. And yes, it's not on their site, but you can call them to get the sim account, with or without the combine, which is what I did before I started my latest 50k combine. I prefer the CTS platform, however a friend of mine who's about to start a combine is trading on the $35 sim with Ninja.

You're right about no weekly loss limit on the combines, only the daily and the trailing max draw. In the live account, you have the additional rules of the weekly draws except for the smaller combines.

"However, they don't say that the maximum daily losses increase along with maximum allowed size, so I have to assume they don't."

Good point. They would have to allow that, or what is the point of the scale up plan? I think it's negotiable after the 11th day. See the rules below:

http://help.topsteptrader.com/knowledgebase/articles/451701-funded-trader-rules

Regarding the 30k account, personally I think it's too restrictive. Besides, for $15 bucks more, you're better off with the 50k as you not only get a bigger draw allowance daily, but also a bigger trailing max drawdown. Although it's true you have to make double the profit, however if you're doing the continuous, then there's no time restriction.

Also, I still think you can't really use the max lot size in the combine, ever, since you can't trade that way in the live account. So if you're a gunslinger in the combine, then you start facing different rules in the live account, you will decrease the odds of profitability in the live account.

This goes back to my prior posts regarding the passing of a combine. If you're in the 50k, and if you're max lot size in the live account is 2 lots to start, then my opinion is to only trade with 2 lots max in the combine, since that is what you'd have to trade in the live account, until you scale up.

 

[ScalperJoe]

I just read the rules on the 10k combine. If one is a total newbie, this seems like a good option. For $95, you are getting a $2,000, 1 lot live account if you pass on the first attempt. (Using AMP's margins of 1k maintenance plus the 1k max draw allowance for 1 lot).