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I don't have enough experience with the psychological component of compounding yet to say that you are wrong. You may be right! In fact, I have evidence from some friends that truly things do get harder and harder; they can't seem to increase in size beyond X contracts. This was a blow to my own confidence, "Maybe I will get stuck too?"
HOWEVER, could it indeed be possible that the extra capital that is pouring into the account as it grows truly offsets the psychological stress of larger position sizes and larger losses on a bad trades? That 1% is really just 1% and never changes? That the mind adapts over time to the bigger account and the bigger dollar swings, which the fractal nature of the markets stays the same? Because it is still all just that same percentages?
That is my hypothesis.
All traders are optimists. The market truly is stacked against us. And perhaps I am the most optimistic of them all. But wouldn't it be great if I could pull this off? $100k in 12 months? Growing steadily week by week (with a few down days at times)?
The funding firms have their place, but only for those who already know what they are doing.
But for the newbies, the funders have already been tried and found guilty. Their asinine incompatible goals of learning to trade responsibly and asking for 9% growth per day are mind boggling.
1) I do not invite any funder to respond on my journal. My journal is dedicated to the micros. The micros are the correct vehicle (after sim) to use to learn to trade, and to get started toward using the E-minis.
2) If the funders want to actually help new traders succeed, then they should devise some low-cost training programs that focus on proper risk-reward, OR publicly show the failure rate of their subscribers and say "Go practice and come back when ready." "The average trader spends $7,000 with us before ultimately giving up." "The average funded trader will blow his account within 2 months." I bet that would go over well, LOL
Also I know VERY little systems that can pump out %2 CONSISTENTLY, if any.
The more common thing that happens is: Your doing good... you size up... your doing great... you add MORE contracts. All is Lambos and Bikinis for life...
I my opinion if they REALLY WANTED TO HELP AND PROFIT they would let anyone aboard that they currently do. Keep them ALL on SIM until certain requirements were met. They would then help the ones they thought had potential and THEN offer a profit sharing deal based on be fact that they are supplying the capital and hence taking the risk. Obviously thats pretty general but why would they do that when they can profit as they know newbies are going to give alot of money to the market anyway.
Most companies have a similar structure. Let's use the 15 contract account from one of them as an example:
To be fair, there is no obligation to complete the requirements in one month, but the suggestion is there that it is possible. If you don't make it, you are "permitted" to remain subscribed for $350/mo. Who wants to pay another $350??? So they try to finish in 20 trading days, and take on more risk than they should for long-lasting growth.
So assuming 20 trading days, and a $9000 profit target, that gives you $450 per day. Easy.
But here is the slight of hand. Here is the deception for those who don't take the time to do the math. (Strong accusation but true). The account is NOT a $150,000 account, as they advertise. It is a $5,000 account!
Why?
Because that is the max drawdown on the whole account! And to add insult to injury, it trails up as you make profits. If you cross below the trailing drawdown, you fail.
What is $450 per day divided by $5,000 max drawdown? 9% profits per day (on average).
Can 9% per day average be reached? Yes. Sustained? No.
If done over 40 trading days (2 months), then the combine player has to earn 4.5% per day. Doable? Absolutely! Sustainable? No.
------- Evals Reimagined
I like your idea on a revised combine!!! If people don't read my journal and just go micros but insist instead on playing the funding game, FINE.
(1) Make it reasonably priced. The companies should drop the stupid huge fees and charge something small like $50 per month. There is only ONE initial account size, "Small." This way they get 10X as many people playing the game and might really HELP traders instead of just give them drugs.
(2) Keep them on sim at the start. They do this already. But see who floats to the top and run with those people.
(3) The goal is consistency. The goal is CONSISTENT careful growth, not 30% one day and -30% the next.
(4) Teach about risk. The max drawdown should be 10% per day max. On a $5000 max DD, that should be a DAILY drawdown of $500 tops! Right now these firms are saying that 80% or 99% drawdown is okay in ONE DAY. And then they wonder why people blow up their live accounts after they have trained them to take 80% risk in one day? They are not stupid. So clearly they want their "clients" to fail.
(5) Train them. Give them one short video training per day. Give them a real chat room to hang out in, but don't have it be a free for all. And DON'T call out trades. People need to learn for themselves!!!!
(6) Give them real micros. Tell them if they are consistent, they will turn the account to live, and give them real micros to play with. Seriously. Give them a $500 account and see what they do with REAL money, not just "Imaginary Evaluation Effluent."
(7) Give them more funds. As someone consistently makes 1/2% per day, or 1% per day, or 2% per week (whatever), give them more funds. Partner with them. Make the drawdown rules pretty strict. Give them time. Make the profit sharing 90% out the gate.
This could be done. Someone could do this.
I already wrote about the folly of hoping for A while rewarding B. It is time for the goal and the incentives to be aligned. At that point, people will surprise you!
The funding companies claim to make the bulk of their money from profit sharing. It think it is a lie. Things are clearly set up to keep people hooked and coming back as long as possible. "Trade with 15 contracts! Have a $150,000 account. Become wealthy beyond your wildest dreams." Yeah right.
Again, no matter how good the funders get, they will never be able to provide something better than a disciplined trader with their own micro account scaling up slowly.
I know guys who have done VERY well on the combines, gotten a live accounts, and done great for many months. Then they decided to cash out and do their own account without the 20% payment. Why did they cash out? 20% profit sharing! Why not just start small on your own and bypass the funding companies all together? IF you are so good, then just scale up on your own. You can do it.
I agree. Trading Futures is NOT an easy road. It's a 100% mental business which requires an insane amount of DISCILPINE. It's NOT you against the market, it's ultimately you against yourself. Even after 8 years of trading every day, I'm still pronged to moving a stop position and arguing with the market. You can build wealth fast Trading Futures. My best week I had a $10K account and made $28K profit in one week trading the NQ. Woke up the next day with a $38K account! Think about it, $28K in 1 week, that's more than most people make in their their 9 to 4 job in a year! Then the next 3 trading days Mr. NQ took it ALL back and some of my original $10k. This was my epiphany....I had no clue what I was doing. This Trading was not going to be that easy and I had to really start the hard work, my type A personality. I knew if I wanted to make it I was going to have to work harder.
If I could give one piece of advice. Please, don't stay in a trade when its draining your account every second while you rationalize this lunacy instead of clicking out. How long should you stay...no longer than you can hold your breathe. This is the number ONE reason for failure in Trading. You will most assuredly fail every time if you do not learn this rule of taking a loss quickly, very quickly. Never, ever, give back more than 50% of your daily profit. You are a defensive lineman, a guard, a watchman over you capital. You must draw red lines to protect your account. No one is going to do this for you. If you fail to apply this, the Market will take your capital, all of it. Regardless of your opinion, the market is a random beast, at times moving completely disconnected to current economic situation. Ninety percent of trading is done by ALGO's. They are programed to surf up and down the charts detecting LONG and SHORT build up positions and then push that direction until they are forced out, rinse repeat. Protect you capital!
I started using the MICROS to mitigate my risk and illuminate the fear of taking an entry. I always was perplexed at how I always did so much better with the SIM Account and then did poorly with the LIVE account, then I noticed that on the SIM Account I was fearless and took trades on my intuitive side, I acted quickly without fear and my results was always good. When I switched to the LIVE I noticed my hesitancy to trade and I would miss big moves. By trading with the MICROS I was able to have the same fearless attitude with REAL Money because the initial loss was so small it didn't affect my decision. This was a big deal for me. Put on 1 micro, if you see the trade is sound then add 5 or 10 more.
THANKS so much for your contribution. You just crystalized 12 pages of my journal in 3 paragraphs! "By trading with the micros I was able to have a fearless attitude with real money...."
So sorry to hear about your crazy win and then loss. Certainly we all have similar roller coaster rides.
Most importantly, I wholeheartedly endorse your idea of getting out immediately when a trade is going against you. How fast is "immediately?" No longer than you can hold your breath! I love it! Capital preservation above all else. If you are in a losing trade, you are probably holding your breath anyway. Once you take your next breath, then click exit.
