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Anybody heard of topsteptrader (review)


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Anybody heard of topsteptrader (review)

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  #521 (permalink)
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Portland, Oregon
 
Experience: Intermediate
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Sufyan View Post
Largest account i've traded is a 5k forex account.
Unfortunately it was down to $200 in a few months. Luckily i've had much more success in recent months, but that that is neither here nor there.

My question is do you agree that in reality the maximum drawdown is the actual value of the account you are being funded, not the quoted value.

In other words, instead of them saying "were funding you with a 50k account", it would be more accurate to say "were funding you with a 2k account" (because if you try to trade account amount, rather than trade the drawdown amount, you will blow up very fast)

I was just curious as to whether my reason was wrong. Sometimes we work something out, but there is a mistake in our reasoning. So I wanted to know (for my own personal decisions, rather than to bash any company) whether I am correct in my line of thinking.

Thanks

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.

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  #522 (permalink)
toronto
 
Experience: Intermediate
Platform: metatrader
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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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  #523 (permalink)
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Sufyan View Post
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 (youll 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 will inevitably blow up. 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.

You are assuming that you would enter every trade with max position size, which is what a lot of people do in combines and blow up.

Also if all you had to trade was $2000 last thing I would do is open a futures account. I would never look to trade futures with less then $10000 per contract traded. Any less and there are much better investments to use the cash on.

The benefit of TST is the ability to spend a small amount to learn how to trade. Even if you don't get funded. Spending a few hundred bucks to take a few combines is much better then blowing $5000, $10000 or more on your first account.

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  #524 (permalink)
Pittsburgh, Pennsylvania
 
 
Posts: 563 since Jan 2013
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Your math is bad. Sufyan's is good.


tturner86 View Post
so TST's margin is $10k a contract, which is pretty standard.

But Sufyan correctly said that one could trade a contract with a 2K capital, so TST's account value is still overstated by 5 times...

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  #525 (permalink)
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Pedro40 View Post
Your math is bad. Sufyan's is good.



But Sufyan correctly said that one could trade a contract with a 2K capital, so TST's account value is still overstated by 5 times...

Yes you could trade one contract with $2k in capital. But again that would be a waste of a good $2000. Or really $1500, because once you hit the $500 margin you can't trade anymore.

EDIT: The reason 95% of traders fail is under-capitalization and a failure to understand risk.

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  #526 (permalink)
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tturner86 View Post
Yes you could trade one contract with $2k in capital.

So we all agree! And that was Suyfan's point, if you wouldn't (or shouldn't) trade 2K per contract with your own money, why would you do it with TST?

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  #527 (permalink)
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Pedro40 View Post
So we all agree! And that was Suyfan's point, if you wouldn't (or shouldn't) trade 2K per contract with your own money, why would you do it with TST?

Because you are not risking your own money?

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  #528 (permalink)
Hanover, Germany
 
Experience: Beginner
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maybe we could all agree on this:

If you are a losing trader, losing a 2000$ maxDD combine is much cheaper than losing 2000$ of your own money.

If you are a consistently winning trader, trading with TST doesn't give you that much more other than someone that monitors you. As you don't get more than the initial DD in terms of buying power, really what you are doing is compounding profits and trade off of them.

Nonetheless, trading your way to a funded account and managing to stay on it is one of the safer ways to prove capability in the markets. From there, reassessing is a whole new story.

thats how I see their system, at least.

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  #529 (permalink)
toronto
 
Experience: Intermediate
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tturner86 View Post
Because you are not risking your own money?

But im not really interested in losing someone else's money just for the sake of losing it. I want to be profitable. So if trading a 2k account is a bad idea because you are undercapitalized, then it is still a bad idea even if you are trading on TST (since your margin of error is still 2k).

Thanks for the feedback guys, but I think I understand it.

I was just hoping maybe there is some other tangible benefit (for example some forex brokers charge a premium on leverage. So using higher leverage costs you more money. A guy with a $2000 account would literally pay more in charges than a guy with $50k account. But it doesn't seem to be the case with futures)

Shame really. I was really interested in TopStep.

But thanks anyway for the feedback.

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  #530 (permalink)
Hanover, Germany
 
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Sufyan View Post
But im not really interested in losing someone else's money just for the sake of losing it. I want to be profitable. So if trading a 2k account is a bad idea because you are undercapitalized, then it is still a bad idea even if you are trading on TST (since your margin of error is still 2k).

Thanks for the feedback guys, but I think I understand it.

I was just hoping maybe there is some other tangible benefit (for example some forex brokers charge a premium on leverage. So using higher leverage costs you more money. A guy with a $2000 account would literally pay more in charges than a guy with $50k account. But it doesn't seem to be the case with futures)

Shame really. I was really interested in TopStep.

But thanks anyway for the feedback.

One thing I might want to add:
If you are trading with 10,000$ of your own money, would you drain it all before reconsidering?
Just because @tturner86 states that he won't bother trading futures below 10k per contract, doesn't mean e is actually willing to burn all of that money in the process. 10k is not his actual risk threshold (probably, I am not him) so he might stop and step back after losing 20 or 30% of the account - which is 2-3k.

So if you think of the max DD for the TST program for what it is - a Drawdown-Limit - the numbers may be seen in a different light...

Not intending to tip your opinion in favor if TST, just adding it for completions sake.

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