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Any long term success stories from funded traders in these get-funded programs?
I have spoken to management at some of these firms at length, and have experience working backoffice at MT4 bucket shops (who all insist they arent bucket shops)
You are correct about the prop firm BEING the counterparty, no argument there. And I agree with your conclusion, which is why I said I dont think I would every even bother trying a "sim-only" prop.
BUT, just playing devils advocate, in futures daytrading there are consistently enough profitable traders that as long as the prop firm has enough time for their analysis algorithms to identify consistently profitable traders who also follow a risk management style that is long term robust, they can (in theory), mirror thast traders trades out to larger scaled "master" accounts of their own, and then happy day, they all still make net profits (and the prop firm only has to pay out to the trader the much smaller profits they generate because of the mirrored scaling). I believe this is the underlying reason for the LeeLoo/Apex 4 month effective delay between passing evals and being able to withdraw anything meaningful (even though they dont admit that).
I know that in the forex bucketshop world, the model is similar - ALL of the trades are done on the brokers server, they net out to ALWAYS being a net in the black because 99.99% of all forex traders fail and lose everything, but for the .01% of the traders who are identified as consistently net profitable AND can manage their risk, the broker switches their trade flow to whats called their "A" book - which DOES get put through to the interbank market. Of course, even there if any broker had too much "toxic flow" they were putting through from their A Book (meaning winning trades, because the counterparties would be losers), the interbank pools would (in theory, because I have never seen this actually happen) cut that brokers flow off. Again, I have seen it threatened on rare occassions, but that is the business model end of it, for retail forex brokerages.
So your point about the prop in the all-sim programs being the counterparty is accurate, I would just say that in theory (and this has been explained to me by the props themselves), they **SAY** that right quick the prop will BECOME a mirror "piggybacker" of a profitable traders flow in the live market at a 10X size.
So again, if you believe them, the risk (beyond trusting them in general) is that their algorithms can identify any winning traders long before said traders (singles or aggregate) flow can bankrupt them. Just want to clarify the risk points accurately. In theory, they arent ALWAYS and forever hoping for the traders to lose. They just want them to win super small until their algorithms can identify and mirror them, and keep them from any withdrawals for many months to give that time.
Its an ingenious business model, great for traders who love to just gamble, not so much for people looking to be serious traders and build a long term trading business for themselves. How cheaply they offer sales and promos should give alot of this away.
I'm not sure that "all withdrawals actually smack their bottom line": I believe that some have software which effectively cancels out their traders' opposing positions and displays their own net liabilities, enabling them to offset those in underlying markets.
That's more or less the same model that at least some of the UK spreadbetting firms use. The effect of that is that they don't mind paying out the winners, and/or at least don't mind which customers are winning.
My understanding (possibly mistakenly?) is that at least some of the MT spot forex "brokers" do the same thing.
I believe that these days at least some of them (perhaps the "more sophisticated" ones?) have that process automated, so they don't actually need to be able identify the winners and losers. For those, "A-books" and "B-books" may be far less relevant.
I think you meant "forex customers"? This may also be quite some exaggeration, I think, though I don't doubt that the great majority lose.
These days, the regulated spot forex "brokers" have to disclose some information about the proportions of winning and losing accounts they hold.
There are always more losers than winners, from what I've seen, but the disparity in the figures for each group isn't apparently quite as high as some of the claims made. I've seen some audited, regulatory statements showing around 70% losers and 30% of accounts in profit, and other figures in that sort of ballpark.
What continues to surprise me is that even the best regulated ones are allowed to promote themselves as "brokers" at all, when of course they're not. The word's terribly misleading. But that's another subject.
(My understanding is that none of the comments above actually apply to Topstep accounts of their funded traders, which are genuine trades in a live market.)
"I'm not sure that "all withdrawals actually smack their bottom line": I believe that some have software which effectively cancels out their traders' opposing positions and displays their own net liabilities, enabling them to offset those in underlying markets."
yes, I meant net withdrawals after any offsetting
And yes, I meant 99.99% of forex retail customers lose, sorry.
BTW, I dont know the *exact* % of retail forex customers who are long term losers, so when I say 99.99% it is clearly meant somewhat tongue in cheek. But I believe the 99.99% is far closer to reality than the often published 70%. Thats just nonsense.
Again, I have worked with management and in the back office at several of these firms. Im talking the retail mt4 bucketshops, not trading desks at interbank pools - those are legit. I agree with you they shouldnt even be allowed to call themselves brokers. But thats why I use the term 99.99% of retail traders there lose everything eventually. With one broker I worked with, they literally booked the trader deposit as revenue immediately upon deposit. Thats how sure they were that they would eventually get it all. Im sure most others are the same. The owner of one well known brokerage told me once that he had never even met nor heard of a **single** long term profitable forex daytrader. Not O N E. E V E R.
I used to manage DonnaForex.com - was there for years. Thousands of forex retail daytraders. Sure, tons of them were profitable for days, weeks, sometimes even months (which is probably the source of those skewed 70% winners stats - there are always streaks of luckies). But those were streaks, and they **ALL** ended up losers in my own experience and observation (including my own). Thats largely why after 7 years of trying I quit trading forex.
By contrast, futures is a different animal - and I know of many traders that are net long term profitable.
My concern is related to the "in theory" and the "if you believe them" part of your text. The theoretical part is easy enough to implement, and I have no reason to think that these companies would not do what you said, so I do actually believe them and in their ability (otherwise they probably wouldn't be in business).
But, they are still a middleman, and an additional point of failure. Why not go directly to the source, the exchange? Why knowingly trade a simulation? Why put a fake order into a fake system, and rely on that system to be up, and to give me real-world fills? Why have an additional entity in the middle? You acknowledged that the company becomes the counterparty. So, why incur that additional risk? Why trust that the company has their financial ducks in a row?
When I put a live order in the market, I put my trust in CME, JPX, HKEX, Eurex, etc. They are on the other side of my trade, *not* another trader, and not another company. It's about as low risk as a trade can be.
In live trading, there are risks that come with a broker. They can go out of business, and while funds are somewhat protected, funds can be lost. Brokers can have technology issues which can cause positions to be exposed. All of these are real concerns, but they are no worse, IMO, than the issues mentioned above.
So, while you say that it can work, and that it probably will, is there a single advantage that would offset the additional risks and concerns I mentioned above?
tried to answer that, post disappeared. Maybe my error.
Anyway, as I said I probably wont be trying any of the sim only props, not that there is anything wrong with them but we have talked about their risks and drawbacks. For their advantages, I would say:
1. low cash for high leverage - for under $100/mo on many of these evals of the smaller size, you can still trade pretty significant size, couldnt be done by someone cash strapped - even with Amp you need $400 just to open an account and trade a couple micros. Any trader who is any good can pass the evals in a month or 2, and those who are just learning get a really inexpensive way to learn where they do have skin in the game in the sense that if they pass, they CAN get paid out (eventually)
2. sim fills are better than live fills, of course, you always get filled on touch
3. no data fee, no cme fee, no NT8 platform fee - most that I have seen charge $80ish/mo for all of these combined, which is a good deal
Yes. That's the problem with this rule and it really makes no sense. I'm not sure what your EOD P&L actually was, but it's perfectly possible to actually blow an evaluation with LeeLoo / Apex on a NET PROFITABLE DAY, i.e., you have a unrealized profit of 5K and you get stopped out on a trailing stop for a 2K profit on a 3K "drawdown". It's really kind of ridiculous. Why would they do that? The answer is simple.
These programs are by design made to make you fail and since they have no incentive to pay you profits as it's out of their own pocket it does not seem like a place a trader would want to invest his time, efforts and money. I had direct experience with this myself when MES Capital liquidated my profitable live account with them.
As for E2T I can only repeat what I've said earlier which is that it seems like the best deal out of all these firms. Most importantly because you actually end up trading real money when you're funded. So there does not seem to be any conflict of interest. You have less of a cushion in terms of daily drawdown, so if you do an evaluation with them make sure you stay smaller on the size. At least on your initial day trades.
I've hit the target on my evaluation account, so unless I do something stupid I should pass to the funded account as soon as the 15 required days have passed.
On the Combine above - I've stayed with mostly 2-4 contracts on ES. The maximum I've done is 6 contracts and I only did that a few times. You can trade 15 contracts at some point, but with a 3.3K daily drawdown that's just one bad trade and you're done. Guys and gals who want to have a fighting chance with this need to stay fairly small, IMO.
By the way - here's some interesting statistics posted at the bottom of E2T:
Exam Disclaimer: As of December 1st, 2021, sixteen point nineteen percent (16.19%) of candidates have passed the Gauntlet Mini™ / Gauntlet™ examinations throughout 2021. This percentage is based on accounts passed against new accounts. The Gauntlet Mini™ / Gauntlet™ examinations are realistic simulations of trading in actual market conditions and are difficult for any experienced trader to pass. Neither the Gauntlet Mini™ nor Gauntlet™ examinations are suggested for individuals with little trading experience.
Maybe not surprising, given the almost-total lack of any entry-barriers, the low cost, and the fact that many participants probaby have neither a genuine edge of any kind nor indeed the skills/understanding to work out whether their trading has a genuine edge?
For "normal" trades in the recent high volatility regime, I rarely deploy more than 1 ES per $50K of capital.
Anyone reading that and think it sounds too conservative? Well, current market volatility (until last week anyway) was about 60-100 ES points per day. 1-minute bars were often 8 points. That's 0.8% of capital, on ONE contract, in ONE minute. So, try trading 1 ES per $10K of capital, and you've immediately lost 4% of your capital in what amounts to noise. And people are given the leverage to trade 20 per $10K... it's no wonder that they blow out quickly.
With a 3.3K max drawdown, I'd be trading MES, and trading about 2 or 3 max.
As volatility settles, I change the size proportionally. As Dr. Brett Steenbarger says, to paraphrase, 'when you have additional volatility, the volatility IS your size increase' ... the logical thing to do is lower size in higher vol regimes, but many traders want to increase it.
And, for what look like stellar trades, I'll increase the risk.
But the whole "risk 1% per trade" that people seem to accept at face value is just bonkers to me. I rarely risk 1% per day, much less per trade. If you risk 1% per trade, it's probably because you feel you need to make 1-2% in a day, because you have a small account, and you're trying to make a living. Sorry, that's not going to happen. You cannot make a living with a $20K account. You need to average 0.5% per day over 200 trading days to net $35K. There are WAY easier ways to make $35K. And that's only 0.5% per day. Sounds doable, but it's not. 271% annualized return? Nice. Keep doing that, and saving it, but don't try to live on it. Take it slow.
Anyway, I guess that's exactly what motivates people to want to do programs like this for financial backing. But with draconian rules in place like I've heard about, seemingly designed to protect the trader but really designed to keep the companies with a steady flow of re-subscribers, it's an uphill battle.
