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Anybody heard of topsteptrader (review)

  #522 (permalink)

Trading Experience: Intermediate
Platform: metatrader
Favorite Futures: forex
Posts: 22 since Oct 2013
Thanks: 0 given, 31 received

tturner86 View Post
You have to understand that the account size is tied to position size. A $50k account gives you 5 contracts, so TST's margin is $10k a contract, which is pretty standard. Even with the best day trading margins you could not trade 5 contracts on a $2k account (assuming a $500/contract day margin.) Max you could trade is 4, and even then you would probably be exited upon entry by the broker's risk desk.

So a funded account is really $50k, but they have built in mechanisms to protect their capital. Which is their right and the smart thing to do.

I understand that a larger account size lets you trade larger. But that is the crux of the issue.

5 contracts on ES = (12.50*5) = $62.5
Add $5 for fees = (5*5) = $25
If you enter with 5 contracts, and price moves 1 tick against you, you lose $62.5 + $25 = $ 87.5 US

Now if you actually own a 50k account, then that is no big deal. You have only lost 0.2%
Even if you use a realistic stop size of a few ticks, you have only lost 1% or so of your account if you are wrong on the trade.
In other words, the money management is perfect, and you wont blow up from being overleveraged.

But because you actually cannot lose the whole 50k funded account (you lose the account if the account value reaches 48k), your true value is only $2000

If you try to trade 5 contracts, you will lose 2% before the trade has even began to move. If you try to use a 5 tick stoploss, you have lost 10% of your risk window. So if you try trading 5 contracts, you will blow up even if your edge is amazing.

So one cannot really argue that the benefit of a funded account is that you can trade larger. You technically can, but you will blow up.
Nor can one argue that you can "build up the account" on small sizes first so you have some breathing room, because you could have done that on your own using your own tiny account in the first place and be in the same position.

You have to trade as if $2000 is all you have. So why not just get the $2000 account yourself and trade your 1 contract (even then the risk is still to high), You would need at least $5,000 (ie the 150k funded account) to trade 1 contract with reasonable money management.

Thanks for the feedback.

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