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Anybody heard of topsteptrader (review)

  #390 (permalink)

Legendary Market Wizard
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I decided to post this here instead of clutter up a thread which it did not really belong in:


SteveH View Post
Josh,

My apologies. I see where I misread that page. I edited the original post with an insert after the incorrect part. There is risk on their side. Looks very minimal though vs their upside potential.

No worries Steve; I think that's the idea though, and both the trader and TST should want to maximize upside potential and minimize downside risk. Here's how I thought through the process:

TST can't "give away" combines. If they did, people would take crazy kinds of risk and trade carelessly, gambling if you will, much like those free trading contests where people make crazy returns. They can do this because there is no risk at all. Thus, the results would not be representative of how a trader might trade with real money. But a $160-$400 risk is enough that most people will try their best to at least get the deposit back. In other words, there is some cost, though relatively minimal, to blowing a combine. This is very different from a sim account on a local machine. Start Monday, trade poorly, reset the sim account and start Tuesday like Monday never happened. Interestingly, it's very possible the poor trading on Monday would not have been so poor, had the trader had some consequences, and had he not been able to reset the sim account at will.

This is, I think, the benefit a firm like TST provides. Whether it's by TST or some other company, or a brick and mortar prop firm, there needs to be some accountability forced upon all traders at some point. Traders by and large simply do not have the innate discipline to do what we need to do without some accountability and consequences. With the TST combine program, if you hit your loss limit, they will let you trade the account for practice until it's done, so you get the data feed, but you get no refund, and no consideration for funding. That alone is a powerful motivator to stay within risk parameters. Same for position sizing; you simply are unable to trade more size than allowed. No more days in sim of trying to stick to 3 lots, and winding up with a 10-20 lot position and pretending that when it breaks even or makes a nice profit that it was realistic.

So, it provides a more realistic simulation/testing environment in which to evaluate. Obviously TST has a cash flow from the combine takers. And when a live trader goes max down (for the $30K it's $1500 max loss from initial balance, or 5%) they lose that money, but that is the risk they take, and no doubt the combine cash flow makes up for this loss. And when a live trader does well, everyone makes money. If the trader can reach the first threshold ($5K for the $30K account), TST's risk is gone and the max loss is the initial balance. The next threshold sees a profit split of 70%, and then 80% for the last threshold.

I think it is nice that they do not force the trader to "lock in" profits -- after the initial threshold is reached, the trader is in control of both his and TST's profit, as the drawdown limit is still the initial balance. Also, a funded trader who fails requirements and returns to the combine does not have to pay for futures combines, they get one free every 30 days. And, after the first threshold is met, the trader is considered "senior" instead of "junior" and if they have to go back to the combine and pass, they do not have to go through "junior" status if/when funded again. In other words, TST does not force the trader to start all over with everything once the trader has proven he can get the job done to a certain degree. And any time the parameters are met and the trader did not lose money in the combine, he gets his money back; hard to argue with that.

In all of this it's important to realize that many traders simply do not have the funding to trade reasonably, so they open a $10K account, are given crazy low margins, and usually blow it in part to those low margins. As I heard FT71 say on a webinar recently, there is no benefit to losing $2000 on a single trade if you have a $10K or $20K account. There is just nothing to be learned there. Rather, it's better to lose $2K over many trades and get actual experience. TST provides traders with a way to learn through experience, at minimal cost, in a more real environment than a local sim can provide, while assuming MUCH less risk than live trading. So if a trader can prove that he can trade, he is given a margin of 1 contract per $10,000 to trade with, not enough to hang himself with, but enough to get the ball rolling. So many of us came into trading wanting to turn $5K into $100K in two years, and programs like this can be the "cure" for this type of delusional misunderstanding of risk. I think that a risk of about 0.25% per trade is reasonable risk. Even with a $30K account, this only lets you have a 1-lot ES stop of 6 ticks, but many $10K traders are cool swinging 5 lots and risking 5% in a single trade. The thought of having something like a $200K account and losing 3 trades in a row at 1% risk, and blow 6 grand in a day stresses me out. In Schwager's Hedge Fund Market Wizards, the majority of the 15 interviewed fund managers had lifetime drawdowns of less than 12%, monthly max drawdowns of 4%, etc., yet you have some folks who are hitting that in a single day; craziness.

I have had the disease, I have blown the account, and I am speaking from experience when I talk about the ills traders possess, as I have had them all!

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