A month later, here goes part 3.
These past few weeks were incredibly hectic, trying to balance trading and opting for a healthier lifestyle by combining daily exercises and cleaner diet.
Nonetheless, this shouldn’t stop us from pursuing our own goals and dreams, one step at a time. I have now failed 3x the 25,0000$ funded account challenge under prop firm “A”. Mostly my mistake, I didn’t take into account the drawdown rule which stated trailing relative drawdown. I think in previous post I went over the difference between trailing drawdown and absolute drawdown but in a nutshell, trailing will move your stop out level as you grow your account, while absolute drawdown means your stop out level is fixed and based on initial starting balance. Most, if not all prop firms require a 10% drawdown rule, however, in my opinion, going for a trailing drawdown is the worst mistake you can make. Here’s why.
Scenario A: Prop firm A offers 10% trailing drawdown for 25,000$ account. Your starting stop out level is 22,500$. If your account goes below this equity level you’re out and done, challenge failed. However, if you manage to go let’s say 26,000$ (1,000$) profit, your stop out level now becomes 23,400$. You have just lost a buffer of 800$. This means, you could make 40,000$ profit and the moment you lose 2,500$ from your highest achieved level, you lose the account. This doesn’t seem right because while you lost the account, your prop firm just cashed in all your money instead of you. 1 bad day and you lose all your work. Makes absolutely no sense.
Scenario B: Prop firm B offers 10% absolute drawdown for 25,000$. Your starting stop out level is 22,500$. If your account goes below this equity level you’re out and done, challenge failed. However, if you manage to go let’s say 26,000$ (1,000$) profit, your stop out level is still 22,500$. You have just increased your buffer to 3,500$. This means you can now have up to 3,500$ of bad trades to be stopped out instead of 800$ with prop firm A. This is a game changer. This means, you could make 40,000$ profit and the moment you lose 42,500$ from your highest achieved level, you lose the account. The money which you worked for stays available for you, instead of being closed out and forced to give all your money to prop firm A.
It took me 3x tries and a total of 750$USD spent to understand this cold hard truth. I would always go to 26,000$-ish, have a few bad trades going back to 25,000$ and instead of “starting” the challenge over again, assuming I still had another 2,500$ buffer to lose (22,500$ stop out level), my account gets closed because my trailing was moved to higher levels since I reached X amount in profit.
I strongly advise against signing up with any proprietary trading firm which has a trailing drawdown structure. You will get bad days, its inevitable, protect your winnings.
I have now changed to another prop trading firm which is also the most popular one out there, FTMO. FTMO uses absolute drawdown but is considered the hardest of the challenges available due to their stricter rules, such as having to close trades on weekends, not being able to trade during news events and a 2 phases process, 10% in 30 days then 5% in 60 days. Most prop firms will give you anywhere from 6 months to 1 year to pass the challenge. Keep in mind that institutional funds make no more than 10-12% yearly.
Recently, they have added FTMO Swing Account which now allows you to keep your trades open over the weekend and can now trade during news events using 1:30 leverage instead of 1:100. From my experience, 1:30 leverage is more than enough to flip small accounts by scaling in on trades and make home runs just like I did this week, see below:
The drop at trades 100 to 120 was exceptionally very difficult to accept. The Bank of Japan decided to intervene in the market for the first time since 1998, causing extreme spikes in the market and hitting all my stoplosses in under 5min only to end up in the correct direction.
That’s the reality of forex trading and why it one of the most difficult market to trade due to its liquidity and volatility.
In this picture, I made +2000$ in a single day by constantly opening new positions as soon as current position reached its profit target, not even scaling in on trades, just placing bets back to back and riding the wave. +2000$ in a day, no scaling-in, and using 1:30 leverage. I think any serious trader should opt for this FTMO Swing account, you only need to be “lucky” once, and by that I mean purposely taking trades with more exposure to meet the 10% under 30 days. 5% in 60 days seems reasonable, only need to make about 150$ a week. (1250$/8 Weeks = 156$ per week)
The account is now at 26,000$, only need another 1500$ and Phase 1 is completed.
To be continued…