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TopstepTrader's Michael Patak (Founder) - Ask Me Anything (AMA)


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TopstepTrader's Michael Patak (Founder) - Ask Me Anything (AMA)

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  #441 (permalink)
Neuwied Germany
 
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Quote:

"If your UNREALIZED Net P&L hits or exceeds your Daily Loss Limit at any point during the Combine, your Combine is no longer eligible for a rollover/refund or a funded account, as stated in the Combine Rules."

If it is like this, for what do we have a max. drawdown-rule? Before i e.g. touch this drawdown, im out already according to this rule above? What am i missing? Thanks!!

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  #442 (permalink)
Bridgeport, Ct
 
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pipandrun View Post
Quote:

"If your UNREALIZED Net P&L hits or exceeds your Daily Loss Limit at any point during the Combine, your Combine is no longer eligible for a rollover/refund or a funded account, as stated in the Combine Rules."

If it is like this, for what do we have a max. drawdown-rule? Before i e.g. touch this drawdown, im out already according to this rule above? What am i missing? Thanks!!


One loss limit is for the individual trading day, one is for the whole combine. You can have several losing days and hit your max drawdown which means your combine is over. You can also hit your your daily loss limit which also means your combine is over. The two loss limits are in place because they want to see you winning over the life of the combine but also manage your risk properly intraday. I hope this answered your question

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  #443 (permalink)
Neuwied Germany
 
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TheShrike View Post
One loss limit is for the individual trading day, one is for the whole combine. You can have several losing days and hit your max drawdown which means your combine is over. You can also hit your your daily loss limit which also means your combine is over. The two loss limits are in place because they want to see you winning over the life of the combine but also manage your risk properly intraday. I hope this answered your question

In my understanding a daily loss limit is a realized P/L.
But they talk about an unrealized P/L which is nothing else like an unrealized drawdown, or?

Example:
$ 30.000 combine, first day, drawdown 600$, daily loss 250$ - im out? Even the max drawdown is 1.500$ (daily loss 500$, but not important for this example) ?

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  #444 (permalink)
Bridgeport, Ct
 
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pipandrun View Post
In my understanding a daily loss limit is a realized P/L.
But they talk about an unrealized P/L which is nothing else like an unrealized drawdown, or?

Example:
$ 30.000 combine, first day, drawdown 600$, daily loss 250$ - im out? Even the max drawdown is 1.500$ (daily loss 500$, but not important for this example) ?

That's correct. In your example, if your unrealized p/l went to even -501 for the day you would not be able to roll over the combine. They have risk control monitors in place that will liquidate your position if you hit your max daily drawdown. Don't ask me how I know that

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  #445 (permalink)
Neuwied Germany
 
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TheShrike View Post
That's correct. In your example, if your unrealized p/l went to even -501 for the day you would not be able to roll over the combine. They have risk control monitors in place that will liquidate your position if you hit your max daily drawdown. Don't ask me how I know that

so in other words, that means forget the max. drawdown and concentrate not to hit the daily loss limit, even unrealized!!

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  #446 (permalink)
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pipandrun View Post
so in other words, that means forget the max. drawdown and concentrate not to hit the daily loss limit, even unrealized!!

You must keep both in mind when you are trading, but if you don't hit either one you will be able to roll the combine even if you do not meet the profit objective.

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  #447 (permalink)
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TheShrike View Post
You must keep both in mind when you are trading, but if you don't hit either one you will be able to roll the combine even if you do not meet the profit objective.

How can i reach a drawdown of 1.400 $, what is allowed according to the combine rules, and remain in the game in the same time? Not possible, or? So, again: cancel the drawdown rule...or?

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  #448 (permalink)
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TheShrike View Post
You must keep both in mind when you are trading, but if you don't hit either one you will be able to roll the combine even if you do not meet the profit objective.

I'm sorry, I think I misspoke. You have to end the combine net profitable to achieve a rollover.

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  #449 (permalink)
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pipandrun View Post
In my understanding a daily loss limit is a realized P/L.
But they talk about an unrealized P/L which is nothing else like an unrealized drawdown, or?

Example:
$ 30.000 combine, first day, drawdown 600$, daily loss 250$ - im out? Even the max drawdown is 1.500$ (daily loss 500$, but not important for this example) ?

Yes, hit a daily loss equal to the daily loss limit and you're out. (It's "unrealized," because even if you haven't closed the trade, they'll knock you out.) The max drawdown is the most you can go into the hole on a total cumulative basis for the entire Combine.

Examples:
Assume daily loss limit = 500, max drawdown = 1500.
Day 1, lose 500.00 -- blew it, you're done.

Reset. Next case:
Day 1, lose 300. OK.
Day 2, lose 300. Still OK. (Cumulative drawdown to date is now 600.)
Day 3, lose 499. Still OK. (Cumulative drawdown to date is now 1099.)
Day 4, lose 499. Now you are out. (Cumulative drawdown to date is now 1598, over the 1500 max drawdown.)

There's a complication that the max drawdown is actually a "trailing" number. You take the Account Balance High, if you had a positive balance at any point, and subtract the max drawdown. That gives you the Account Balance that you have to stay above. If your Account Balance High keeps going up, which you hope it does, then the Balance you have to stay above goes up too, until it reaches the original balance of, for example, 30,000. Then it doesn't trail any more.

Example:
Assume a starting balance of 30,000, and a max drawdown of 1500.

Day 1, make 1000. You feel good. Your Account Balance is now 31,000, which is also your Account Balance High so far. If, after today, you lose 1500 from that point, which means if your balance now goes down to 31,000 - 1500 = 29,500, you are done.

In the examples above where you never had a positive balance, you could go down to just above 28,500, which is 30,000 - 1500. So the point where you are in trouble has been trailed upward because your account high point went upward.

Day 2, make 100. Now Account Balance is 31,100, which is your new high point. Now your trailing balance number is 31,100 - 1500 = 29,600. If you hit or go below an account balance of 29,600, that's it, you're out.

Day 3, lose 100. Your Account Balance is down to 31,000 again. Your Account Balance High is still 31,100, because that's still your high point. Your trailing balance number is still 29,600. since the high point didn't change.

Day 3, make 600. Your Account Balance is now 31,600. That's your new high point, but the trailing minimum balance will not go up above your starting balance -- it will be 30,000 and will not go up any more. So now, really, you could lose up to 1599 (which would get you to 30,001 from today's balance) and still be OK.

Day 4, make 100. Your Account Balance is now 31,700. Your Account Balance High is also 31,700. The trailing minimum still doesn't trail up any more, and is still 30,000. Now you could actually lose up to just below 1,700 and stay in the game. You've built up a cushion because of your account high point.

Etc.

This trailing balance stuff is calculated at the end of the day.

This trailing thing is hard to understand, until you get it, then it's easy. More explanation here, with a chart: Trailing Max Drawdown ? Help & Feedback Center

So every day, you need to be sure you don't lose more than the daily drawdown on an open trade (unrealized) basis for that particular day. But you also need to not draw the account down below your trailing balance limit, or you are out also.

Just takes some getting use to....

Bob.

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  #450 (permalink)
Chicago, IL
 
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jcdawsey View Post
Hello Michael,

I have a small group of colleagues/students that maintain contact throughout the trading day via Skype. Two of my students recently passed the combine, but were asked to go through the live trader prep. Both passed the continuous 50K combine. I am transitioning from my live account to a TopStep account and hope to complete a continuous combine as they have, thus I have a few inquiries...

1. Can you share some specific reasons as to why some people might be asked to go through the live trader prep?

2. What percentage of those that pass the combine are asked to also go through the live trader prep?

3. Once the TopStep Team has approved someone for funding, how long does it normally take to get his/her account?

4. How many active funded traders do you currently have?

5. What percentage of traders that make it to the funded traders level are able to maintain at that level, and what percentage fall back to the combine level?

6. Is there a limit to how many funded traders your equity partner will fund? There seems to be many more people passing the combine as of late.

Thank you,
James D.

James-

I did my best to answer the below. I hope this helps:

1. Can you share some specific reasons as to why some people might be asked to go through the live trader prep?

Inconsistencies such as poor risk reward ratio, average winning day vs. average losing day, trading volume, number of trades, majority of profit in the Combine from 1 trading day (pop shots), consecutive losing trades are some of them.

2. What percentage of those that pass the combine are asked to also go through the live trader prep?

I don't have an exact percentage as this fluctuates depending on the traders we review and their performance. The live trader preparation is really a great segue into the funded account, it creates confidence in your strategy and has been vital to many of our funded traders making the best of the opportunity once funded.

3. Once the TopStep Team has approved someone for funding, how long does it normally take to get his/her account?

We now have the process down to no more than 2 weeks, depending on how quickly the trader provides us with their information and the business of the clearing firm. BUT are goal is to drastically shorten this time once we have some automation features launched here soon. With the amount of funded traders we are seeing, these features to streamline the funded account process for the user have moved up in priority.

4. How many active funded traders do you currently have?

Number of active users both Funded or in the Combine are private. We have funded over 400+ since the company started and 5 in the first 10 days of the new year. This month we will have around 13 moving to a funded account, so the pace of traders reaching the funded level is increasing.

5. What percentage of traders that make it to the funded traders level are able to maintain at that level, and what percentage fall back to the combine level?

Trading is a very personal journey and everyone's results are theirs and theirs alone. The success or failure of any one has nothing to do with your success or failure. Therefore, we do not provide this number. I can say that we are happy with the Funded Traders performance and it has increased since TopstepTrader inception.

6. Is there a limit to how many funded traders your equity partner will fund? There seems to be many more people passing the combine as of late.

No, there is not a limit to how many traders our equity partner will fund.

Again, I hope these answers help. All the best.

Michael

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