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Any long term success stories from funded traders in these get-funded programs?
That's have been my view, too, but I'm not quite sure. Still a bit undecided on that, to be honest.
I believe TopStep have a 15 + 15 = 30 day evaluation phase. So, not really a viable option when the others offer a 10/15 day evaluation period.
If we look at the math, I spent 15 days to get funded for a cost of $350. During this time, I made $9000 of profits.
Let's just use similar performance numbers and say I'll be able to make another $9000 of profits within the next 15 days as a funded trader.
With a total of 30 days invested/traded, that is $9000 / 30 = $300 per day. But I'm only getting my first $8000 without a profit share. After that, it's a 80/20 % profit share. So, $8800 / 30 = $293 per day. That's the equivalent of 293 / 50 = 5,86 ES points per day on one contract or 1,17 points per 5 contracts.
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Let's say I don't have much capital, but would be able to fund a micro account with $500 instead of paying a subscription fee to these funded programs.
Assuming no compounding, I would have to generate $293 / 5 = 58,6 MES points per one contract per day. Even if I use 5 micro contracts, I would need 12 MES points per day to match the profits generated in the program.
Mathematically, it seems to me there's an advantage with the get-funded program over trading your own micro account with an equivalent funding.
Or am I missing something?
Now, the interesting thing would be if these companies would eventually entrust a trader with a bigger capital base to trade, i.e., "We see that you're really good at this and would like to offer you a larger account to trade for us..."
That would be an opportunity for sure.
Sadly, it seems to me that you'll never be able size up other than if you risk your own profits you build up in the account.
In practice this means that as soon as I removed my initial 8-10K of profits - I'm back to square one and have to rebuild a 'cushion'.
Of course you won't get slippage with a limit order.
The slippage issues I mentioned on page one did not repeat themselves so far. There's been a few very violent/fast moves that could have given actual slippage, but didn't have any stops in the market on those.
Regarding the topic of the thread, I've been sort of mulling this over for a while also.... not so much the question of whether anyone may have become a long-term "funded account" trader -- I assume there will always be people who do anything, good or bad -- but whether it really pays in the long run, which is the actual question.
Both @Howard Roark and @dannyinhouston have put their fingers on what I think are different aspects of this entire "get funded" type of program.
In a short time, @Howard Roark has built up a decent amount of margin with little cash layout. This is not what most traders who attempt these programs do, as we have seen for years in their trading journals. The reason is that the "Combine" type programs do shield you from risk (while being a little more risky, and so more real, than pure sim,) but you still have to iron out your trading issues. If you don't do that, no program is going to do it for you. (There are always complaints about the monthly fee, but really, how long does it take to gain or lose 150 or 300 bucks in a live trade? How many minutes is the right question. A few hundred a month literally is nothing.) So a good trader -- or one who can become good quickly -- who needs money can put these programs to good use.
I think that a pure beginning, "I'm trying to learn this" trader, probably should put a small amount in a live micro account instead and learn there. The monetary risk is small and it is genuine trading in the real market, a true plus.
(Perhaps people who are in between should just flip a coin. )
Personally, I think there is a time to move on from either of these, assuming one is successful.
One comment on the margin issue: at least in TopStep, the only program I know anything about, the number of contracts you can trade is not dependent on your account balance as such, because it is not actually margin. The account is margined with the broker by the overall master account balance of the company. The individual trader is allocated a certain number of contracts as he/she achieves profit goals according to a "scaling plan," but if the trader withdraws some of the accumulated funds, the maximum allocated contract limit does not go down to match the changed balance. So, so long as you don't blow up the account, you have earned a certain number of contracts and you can manage the amount of your risk on your own... you don't have to keep a certain margin amount. There can be both an upside (potentially more leverage) and a downside (potentially more leverage) to this.
They will cover your losses until your trailing max drawdown has gone into positive territory, and after that, this is the only time the firm is adding anything that you wouldn't have on your own. But it may be valuable to some traders who believe they can manage the risk.
I don't know how or whether the other firms go about this, but it is the only long-term plus I have identified for the TopStep version. Otherwise, TS has downsides: CME professional data fees, taxation as regular income (no 60/40 split for US residents) and of course, their rules, which are not necessarily your rules.
Note that it has been a whle since I really looked at the TopStep rules and that something may have changed. Also, this is just my take on what is desirable. Some may shrug and say "who cares?"
But I think @Howard Roark's question is the right one, and this is my take on it.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
Actually, see my previous post. If I haven't misunderstood or forgotten their policy, and if they haven't changed it, this is exactly something TS does.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
I understand all the analysis, but no one mentions the actual margin to trade. If you're trading the NQ, the margin per contract is $1,000. Conservatively, to trade 1 contract, you should have at least 3x margin or $3,000 in the account to trade.
Trading micros might be good practice but you're not going to make much of a living. The advantage of these prop firms is that, if you're a decent trader, you can trade size and they put up most of the margin. Yes, you have to build a cushion in the account with your own money but it's small compared to doing it yourself. If you trade 6 NQ, you need at least $18,000 in your personal account. If you're with one of these firms, you can probably get away with only $10,000 to trade 6 consistently.
Two scalps per day, 15 tick profit target, 6 contracts yields about $900 gross. Do that consistently and manage your losses and you might have something - it's called making a living.
If you're not netting out an average of $300-500 per day after fees, you need to find another profession.
Funny how nobody ever considers the tax implications? If you blow accounts at Topstep it's money out the door. Blow a live account and you can bank the capital gains, will stay there to be offset when you become profitable. You can offset $3,000 each year of losses against your regular income. If you have a big capita gain, outside of trading, you can offset up to all of your losses against the gain.
With respect to "not being able to make a living on micros?" Again, missing the point. A beginning trader can get 99.99% of the actual market experience with micros, and scaling up after learning is the best approach IMO. Until you are consistently profitable, why loose 10x?
BTW - intraday margin for micros is $50 for MES and MYM and $100 for MNQ.
Yes. If you don't know how to trade it's not really the way to go, yet that does not seem to stop people from trying. Trading micros instead isn't going to solve that problem either. There's a social area on the OneUp page and I saw some guy who had spent $8K on subscription fees and still wasn't funded. Yikes. I think I saw another guy on this board who said something similar. And there seems to be many, many people who have got funded and then blew up.
That said, I actually regret not trying this sooner. Or put another way - I regret not doing more simulator training before risking live money and ironing out my real issues and lacks. I'm on top of my game right now, but I lost a LOT of money to the markets that could have been avoided if I just was patient enough to have traded in a simulator or with very, very small size.
These programs seems like a middle ground between simulator and a personal account as you definitely need to be very serious and treat it like a real account if you're going to make it. Yet, at the same time, your risk is limited to the monthly subscription fee.
There will be unending differences of opinion on the best way to go. I think you can succeed on either path (and others too), and you can fail on both. I believe that lack of realism by traders about how they actually trade and what they actually need to do to improve is one of the major reasons. Changing the venue where you are unrealistic will not solve this.
Generally we tend to advise traders to get into real-market trading as soon as they can (with small size), because pure sim is usually too risk-free to teach people some of the things they need to know. Yet, any trading where the effort is to honestly work on a person's trading issues, especially the ones due to impulsiveness and unrealistic expectations, will be of help. For a few traders, the artificial risk of sim losses is enough to make them respect the markets, for others (this would be me ) it takes real money being lost. But the issues are not going to be different in any case. As you say, doing something to limit those losses while you're working is also necessary, since you can lose essentially without limit if you keep doing the same things, hoping for a new result.
I'm not making light of anyone's troubles or frustrations either. I know why people give up, and I know why they hang on without any real improvement. It is not an easy thing for anyone.
For some, it can be a good idea. For others, less so. The outcome is what is important, not the way you get there.
Congrats for your successes, I hope for more.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
Another point regarding taxes, a successful Topstep trader will give up a portion of their profits to Topstep, then if you make any money and withdraw, at the end of the year you will probably receive a 1099 which will be (1) ordinary income if you did not set up an LLC or (2) business income if you set up a LLC.
However, from a live account you pay futures taxes 60/40 long term/short term capital gains tax, which for most folks is a much better option.
For every $100 you pay to Topstep, and if you don't make any profit, you give away $100 in tax "credit" that can be banked until you actually make money from a live account. Add to that the 20% (or whatever) cut you pay to Topstep and it's just a no brainer.
There is zero difference in market feel between micros and minis, why not suffer your losses at 1/10x and gain the tax benefit? If you loose $25,000 on a live account, those capital gain losses are "banked" against winnings in the future. So let's say next year you make $25,000 in profit - you pay zero tax.
