Discussion in 'Prop Firms' started by Peblo, Jan 25, 2020.
Any examples of those firms offering 30:70 or 50:50?
TopStep and other similar ones that offer 80-20 split in your favor--can do so because the funding they provide in your "funded" account is 1-time funding not recurring revolving repeatable funding. Meaning the catch is TS only provides the initial funding with the caveat that there is a trailing max drawdown (not a fixed max drawdown). The firms that offer 50-50 (or less) usually offer a fixed max drawdown
What is the difference?
Huge difference in my opinion
80/20 deal TopStep Trader (TS) scenario with trailing max drawdown: if you withdraw your profits down to zero Topstep will close your account because they only offer a trailing drawdown and not a true fixed drawdown.
Once you have made profits equal to your max drawdown - a trailing drawdown requires you to keep profits equal to the max drawdown in the account (meaning you cant withdraw them if you still want your max drawdown)
example: $4,500 max trailing drawdown in your funded acct - you start out week 1 and generate $4,500 in profits. If you withdraw the entire positive balance of your funded account of $4,500 your account is closed. Their risk is overwith---you must now keep all $4,500 in the account and it now is your cushion to keep the account open.
The real funding is just provided at the start of the funded account - if you lose daily and keep losing then eventually when hit your max allowable loss the account is closed and they have taken the loss bot you. Conversely though if you generate profits you must keep profits equal to max drawdown always in the account to keep that drawdown--hence--trading with your own money at risk from that point on and paying them 20% (at least that is my opinion on how this works out for TS)
50-50 scenario with other companies that offer a "fixed" max drawdown
if you withdraw your profits down to zero your account is NOT closed (like with TS)
If your max "fixed" drawdown was $4500 with the 50-50 company and you generated $9,000 in profits and you want to withdraw all $9,000 and take your account back a $0 starting balance then the $9,000 is withdrawn--they get their $4,500 cut and you get the remaining $4,500 and then your account balance is now $0.00 but unlike TS you still have your account open and you still have your max drawdown available of $4,500 just like you did on day 1
So whats the bottom line...
In my opinion
With firms like TS that offer 80-20 split with the trailing max drawdown caveat "catch"
the trader is actually Penalized for his/her success in trading. These types of firms are not interested in your long term success in my opinion since you are not allowed to keep your funding if you withdraw all profits down to zero as they close your account then and these firms are looking to free ride on your capital by forcing you to keep your profits in the account to keep a drawdown equal to the beginning drawdown
With firms that are 50-50 split they seem more interested in your long terms success and allowing you to pay yourself profits to the fullest extent on a recurring basis and not have you penalized for your withdrawals like TS does. That is why these firms charge 50% as they are more interested in earning a percentage of your continued success rather than ways to trip you up. Also some of these firms offer to substantially increase your funding and your fixed max drawdown after you show consistent profitability
Not exactly truly fair since it's their capital.
Why not just make the 5,000, leave it in the account, then everything after is 80:20. If you're successful, no problem. If you break a rule, then you get that 5,000 back and account closed anyway. Not saying the rules are easy.
Look at it this way. Would you give a bunch of remote traders 80:20 of your own cash with a 4,500 drawdown?
ok in my opinion the difference is as follows:
Lets do exactly what you just said
Make $5,000 in profits and leave it in the account
Ok fair enough but lets look at 2 different scenarios now that you have generated $5,000 in profits in your newly funded TS account
Scenario 1 is your scenario - you have generated $5,000 in profits and instead of withdrawing them you leave it all in the account as tyou stated and from now on only withdraw thos profits that are over and above $5,000 you left in your account. Now lets say you continue to generate $5,000 in new profits each month for the next 12 months.
Month 1 - You trade well and generate $5,000 in profits and all $5,000 are left in the funded TS account to keep full trailing drawdown. No profits withdrawn in month 1.
Month 2 - You continue to trade well and generate $5,000 in additional profits and now your toital account balance is positive $10,000. You withdraw the additional $5,000 in profits generated this month and leave $5,000 in your account. TS takes their cut of your $5,000 withdrawal and that is $1,000 and you net $4,000.
and now for the next 11 additional months you continue to generate $5,000 in new trading profits each month and make your $5,000 withdrawal and leave the original $5,000 in the acct and each month TS takes its 20% cut of your $5,000 profits withdrawal which is $1,000 each month to TS and you net $4,000 each month.
At the end of the 12 additional months of leaving the original $5,000 in the account you have generated an additional $60,000 in profits but only netted $48,000 in your pocket as 20% ($12,000) went to TS.
Scenario 2 - you withdraw all $5,000 in profits from the TS account - they close your account due to no funding left due to the way they configure the trailing drawdown.
You then take the $5,000 and open an account with Tradovate and deposit the $5,000 into it and set the risk parameters on your new Tradovate account to be the exact same as TS's with the same daily loss limit and same max trailing drawdown. And now lets say you continue to generate $5,000 in profits each month for the next 12 months
Under this scenario you can withdraw the full $5,000 in new profits each month and keep all $5,000 as you are not paying 20% to TS anymore (even though your trading account with Tradovate has the same risk parameters as as TS account would have had). The 20% each month on $5,000 in new profits is $1,000 so over a 12 month period you have saved $12,000 that you would have paid to TS had you kept the $5,000 in the TS account and continued to trade through your TS funded account.
At the end of the 12 additional months you have generated an additional $60,000 in profits and you have netted $60,000 in your pocket - saving $12,000 VS scenario 1 with leaving the $5,000 in the account and continuing to trade with TS
Keep in mind 2 additional things
1) There is no defined increase in funding (a carrot) that TS offers (that I know of) should you consistently make trade profits over time. So you must leave the whole $5,000 in original profits generated in the account to keep the same trailing max drawdown
2) the firms like SMB Capital actually define on the website that if you consistently generate profits over the initial 6 month period that your max fixed drawdown is increased to $25,000 which is over 5X what TS's biggest account offers for futures trading which is the "$150k" account that just has the $4,500 "trailing drawdown" - not fixed
I get what you're saying. It's not really a 50k account, it's more like a 5k account. I mean you could do that... Get the profit and leave.
You could potentially trade well for 6 months and try and renegotiate your agreement - you'd know for sure then...
I can't for the life of me understand the lure of these scams. So you have say $25K in BP but at exchange haircut and no overnights? Why not simply put a few grand in am AMPhetamine futures account and trade micros at zero split?
You pull profits and they are treated in the DD stat? SCAM.
No what it really is at that point is that you are trading with your own money (the original $5,000 in profits you generated and decided to leave in the TS acct) and paying TS 20% of the profits from trading your money.
In my opinion the only real funding is provided by TS is at the beginning of your newly funded TS funded account because at that point if you are a terrible trader and and never even generate daily profits then yes they are on the hook for at least the daily (and weekly) loss limit of $3,000 if you violate that--or potentially on the hook for as much as $4500 if for example if you lost $500 per trading day and lost $2500 in the 1st week of trading (so you never violated the $3,000 weekly loss limit) and then in the 2nd week if you continue to lose $500 per day for 4 additional days and then your total loss for week 2 is is $2,000 and added to your loss on week 1 of $2500 now you have lost a total of $4500 and your account is closed.
However--if you generate profits your trailing max drawdown goes off of equity peak so you are actually penalized for profitable trading under a trailing max drawdown scenario ("penalized" when compared to a fixed drawdown scenario)
So ask your self this question --if you are a consistently profitable trader--wouldnt you make much more money under a 50-50 scenario that offers increased funding up to a $25,000 max fixed drawdown VS a trailing drawdown of $4,500
Lets say with a $25,000 fixed drawdown (fixed drawdown means you can empty the account of all profits to zero and you still have the max drawdown of $25K in place) you are trading 5 times as many contracts as you are with TS with your $4500 trailing drawdown
Going back to the example used before you generate $5,000 a month in your TS account (over and above the initial month that you generated $5K in profits and kept all $5K in their to keep your drawdown) - TS takes their 20% cut and you are left with $4K net each month
With the $25K fixed drawdown you trade 5 times as many contracts as you do in the TS account with only the $4500 trailing drawdown so you make 5x the profits, in this account you are generating $25,000 a month in profits and they take out their 50% and you are netting $12,500 per month VS the TS account where you are only netting $4K per month so you are netting triple the profits each month and you can withdraw all profits down to zero as often as you like and still have the full $25K max drawdown to trade with VS TS you have to leave $4500 in the account at all time and only can withdraw those profits over and above the $4500
Whilst I agree with that, it's also unlikely someone is going to get funded 50:50 from a prop firm.
that is what SMB Capital does (50-50 in funded account) with the people that pass their Futures tryout
do you know any other firms that offer a fixed drawdown?
Separate names with a comma.