VirtualMark 

It's tough to say, there are pros and cons to each of them. The elephant in the room being that any of them who put you on a sim account lose money when they pay you out, so that's my first thought for any that keep you away from a real live account. Topstep looks good at first, with clearly defined rules. But when you delve deeper into their accounts, you'll see that they set you up to fail. They have a daily loss even on the funded accounts, and that's always there so you can never truly scale the account up. They also have a scaling plan, and don't allow 10 micros for 1 mini, so you are forced to either trade 1-2 micros or 1-2 minis when you start your funded account.

How do you know that they lose money when they pay you out? TST, for example, clearly states that "your trades inform our trades" (or something to that effect). In other words, if they're smart, they take the collective delta of their funded sim accounts and hedge an equivalent portfolio long or short themselves. If you knew you had to pay someone based on their position, and you knew their position, wouldn't you simply take their same position? No doubt the loss limit on the funded accounts is less than the average required in subscriptions+resets to get that funded account across all traders, so even if they lose money on their hedge, they're covered by subscription income. And if you knew the top 1% of funded traders with access to their order flow, you'd probably take some outright risk (above and beyond a hedge) matching that. The entire business model has at its core the fact that they have order flow for a wide range of trading abilities, and they can act based upon it. To think they lose when they pay out is leaving out a big part of what makes the whole thing work.

In other words, any firm's business model will include hedging funded accounts so they can profit a sufficient amount to cover payouts, and will price the subscriptions sufficiently to cover their own hedged losses.

For your second point, the TopstepX platform allows a 10:1 micro:mini ratio for several products. Not with Rithmic though.

josh 

How do you know that they lose money when they pay you out? TST, for example, clearly states that "your trades inform our trades" (or something to that effect). In other words, if they're smart, they take the collective delta of their funded sim accounts and hedge an equivalent portfolio long or short themselves. If you knew you had to pay someone based on their position, and you knew their position, wouldn't you simply take their same position? No doubt the loss limit on the funded accounts is less than the average required in subscriptions+resets to get that funded account across all traders, so even if they lose money on their hedge, they're covered by subscription income. And if you knew the top 1% of funded traders with access to their order flow, you'd probably take some outright risk (above and beyond a hedge) matching that. The entire business model has at its core the fact that they have order flow for a wide range of trading abilities, and they can act based upon it. To think they lose when they pay out is leaving out a big part of what makes the whole thing work. In other words, any firm's business model will include hedging funded accounts so they can profit a sufficient amount to cover payouts, and will price the subscriptions sufficiently to cover their own hedged losses. For your second point, the TopstepX platform allows a 10:1 micro:mini ratio for several products. Not with Rithmic though.

You have a strange way of looking at things. If I knew I had to pay someone would I take the same position? No, of course not. What if they put 10 contracts on NQ and lose $3k? I just lost $3k too. And that's assuming a 1:1 ratio.

After seeing Apex's recent video, they showed that the vast majority of PA accounts only get to the first payout(if they get there at all). After that they usually end up blowing the account. That's not a style of trading I'd like to copy en masse, and tbh just copying all trades seems like a terrible idea. People just don't trade these like it's their own money.

Personally I think they probably keep an eye on their consistent and high performing traders, and they may copy some of the more experienced ones. As you said the top 1% probably generate a lot of the income.

But it's fairly obvious that if they pay people out they lose money, and I'm surprised anyone can miss this. The business model seems to mostly be to pay traders out from other traders fees, based on the fact that most of them blow the accounts before they get anywhere near a payout. Some of these guys had hundreds of accounts and lost them all. And even if they pay you out from the top 1%, that's still them losing money as they're using someone else's profits to pay you.

As for your second point, that's good to know, they must have updated it recently as I was in touch with them a few months back and it was still 1:1. Although it's only for the express funded account and for the lousy TopstepX platform, you can't get 10:1 on a live account or on Tradovate etc. So not much use yet, I wish they'd sort this fairly simple problem out.

VirtualMark 

it's only for the express funded account and for the lousy TopstepX platform

That's a white-label version of TradingView, isn't it? Maybe not quite so "lousy"?

Tymbeline 

That's a white-label version of TradingView, isn't it? Maybe not quite so "lousy"?

Have you tried it? I didn’t like it tbh, would rather stick with an established platform.

And there have been quite a few teething problems from what I’ve read, probably par for the course with a new platform. Maybe some people love it, idk that much about it though just going on what I’ve seen so far.

VirtualMark 

Have you tried it?

Not through Topstep, no. I've used TradingView before and didn't mind it at all, actually. I prefer Tradovate, really, but that can have its problems, too.

VirtualMark 

You have a strange way of looking at things. If I knew I had to pay someone would I take the same position? No, of course not. What if they put 10 contracts on NQ and lose $3k? I just lost $3k too. And that's assuming a 1:1 ratio.

Yes, but they paid a certain amount in subscription/eval fees, and in the fee to open the funded account in the first place, that reduces your cost. And, if they make $3k, well, you lost $3k if you didn't take a position to hedge some of that. Nobody knows for sure what they do as they are a private company. Perhaps they don't hedge for the first $X on PA accounts, but after a certain record of profitability is shown, they'd do very well to do so. When market makers sell calls to customers, they buy a commensurate amount of stock to delta hedge so that they're not exposed to directional risk. I know this isn't options trading but it really follows a similar principle. But really, we don't know how they run the business, that's just what I would do.

josh 

How do you know that they lose money when they pay you out? TST, for example, clearly states that "your trades inform our trades" (or something to that effect). In other words, if they're smart, they take the collective delta of their funded sim accounts and hedge an equivalent portfolio long or short themselves. ... The entire business model has at its core the fact that they have order flow for a wide range of trading abilities, and they can act based upon it. To think they lose when they pay out is leaving out a big part of what makes the whole thing work.

I have been curious for some time about what TST means when they mention "your trades inform our trades" (referring to the traders in the in-between "Express Funded Account" category, who can get payouts but are in sim, as opposed to the actual funded traders, who are trading the live market.) They are saying pretty much that they will do something with that order flow knowledge, but are not saying anything about what that is.

TST knows at any one time what everyone's positions and recent trading history is. Since the company will have an exposure from paying out to successful "XFA" traders, they might want to have a hedge against that liability by making the same trades, as suggests (company loses on the payout, makes it up on the trade). They also might take the opposite side against the traders who aren't as likely to succeed -- who aren't managing their trading or risks well, which is somewhat similar to 's suggestion that they would trade against them. We don't know, and they might do both, or something else, to limit their risk. They aren't necessarily going to hedge every trader the same way, if at all, but they will know the traders who are doing well and those who are not.)

I think we can take it for granted that they are going to put the trading information they have to use, and that they are not fools. So it is not necessarily obvious that these firms are always going to be losing if they pay out to sim traders. They have some potentially very valuable information here, and they are going to have an incentive to use it.

So as to whether they are going to always lose by paying, they they must not think so, or they wouldn't do it.

But no outsider is going to know, one way or another.

josh 

In other words, any firm's business model will include hedging funded accounts so they can profit a sufficient amount to cover payouts, and will price the subscriptions sufficiently to cover their own hedged losses.

I would suggest that, if they are making the promised payouts (which of course is a crucial matter), then they are not going broke doing it. Of course, the trader has to do their own due diligence to be sure they want to go with a particular company. But I don't think that paying out for the sim account trades is necessarily a flag. I think they've figured out how to do that.

Bob.

bobwest 

I have been curious for some time about what TST means when they mention "your trades inform our trades" (referring to the traders in the in-between "Express Funded Account" category, who can get payouts but are in sim, as opposed to the actual funded traders, who are trading the live market.) They are saying pretty much that they will do something with that order flow knowledge, but are not saying anything about what that is. TST knows at any one time what everyone's positions and recent trading history is. Since the company will have an exposure from paying out to successful "XFA" traders, they might want to have a hedge against that liability by making the same trades, as suggests (company loses on the payout, makes it up on the trade). They also might take the opposite side against the traders who aren't as likely to succeed -- who aren't managing their trading or risks well, which is somewhat similar to 's suggestion that they would trade against them. We don't know, and they might do both, or something else, to limit their risk. They aren't necessarily going to hedge every trader the same way, if at all, but they will know the traders who are doing well and those who are not.) I think we can take it for granted that they are going to put the trading information they have to use, and that they are not fools. So it is not necessarily obvious that these firms are always going to be losing if they pay out to sim traders. They have some potentially very valuable information here, and they are going to have an incentive to use it. So as to whether they are going to always lose by paying, they they must not think so, or they wouldn't do it. But no outsider is going to know, one way or another. I would suggest that, if they are making the promised payouts (which of course is a crucial matter), then they are not going broke doing it. Of course, the trader has to do their own due diligence to be sure they want to go with a particular company. But I don't think that paying out for the sim account trades is necessarily a flag. I think they've figured out how to do that. Bob.

If I understand correctly with these funded trading platforms, there are at least two levels of SIM trading which needs to be passed before getting to a live account. If the trades aren't real, there is no other side of the trade to take. Is this thinking faulty?

I also wonder about the value of the information gained from most of these traders. I'm presuming most of the data are everyone averaging into losers from both directions, with some exceptions here and there (and it's a small sample size). Perhaps this contributes to Apex not wanting DCA in addition to the gambling mentality - the data is of little value.

ThemBones 

If I understand correctly with these funded trading platforms, there are at least two levels of SIM trading which needs to be passed before getting to a live account.

I think that's often true, but not always. For example, with TradeDay I believe there's a single-step evaluation after which people "passing" (sometimes after as little as 7 trading days) can elect to go on a live account immediately.

ThemBones 

If I understand correctly with these funded trading platforms, there are at least two levels of SIM trading which needs to be passed before getting to a live account. If the trades aren't real, there is no other side of the trade to take. Is this thinking faulty? I also wonder about the value of the information gained from most of these traders. I'm presuming most of the data are everyone averaging into losers from both directions, with some exceptions here and there (and it's a small sample size). Perhaps this contributes to Apex not wanting DCA in addition to the gambling mentality - the data is of little value.

At least with what I was talking about, there are generally two levels of sim trading, then a full real-market account after that. I haven't kept up with what is out there, and have only a little knowledge of what Topstep does. But for them, there are these sim levels:

- The first sim level -- trader just gets sim profits/losses, and doesn't get paid any actual money.
- The second sim level -- trader is still not making real trades, but the account does get paid real money (and only loses sim money, a nice deal). This has different names in different firms and there are different conditions, especially regarding when the trader can take a payout (get money sent to him). At this level, the firm has to come up with the money from somewhere, because it's real cash.

just basically took something that Topstep (TST) has said a few times about their using the second level trades to "inform" the firm's own trades. The hypothesis, which I like, is that they hedge their liability to pay out on a successful trader's sim trade by taking the same trade, at least for some traders, in the real market. I added my own guess (no more than that) that they might also consider the success level of their trader, and go long, for example, when the weak traders go short.

Do I know whether any of this is actually what they do? I hope I made it clear that I don't know anything about what they do. But I agree with that this sort of hedging their risks this way makes sense.

As to whether the information is really that valuable, well, I don't know that either. But let's say they only took the highly profitable traders, and hedged against their trades by making real trades. That will cut down the net cost of their payouts, which are also going to be somewhat offset by the fees that every trader pays.

That's all I mean. And pretty much pure speculation, except for the fact that they do say that they use the sim trading info to trade with.

Bob.