Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
I know there's lots of threads about what is a reasonable rate of return, but I wanted to have a focused discussion as it relates to combines and newer traders. The best hedge funds in the world make 15-20% in a year. Most combines out there are looking for a return of 10% over the course of 1-3 months. Is this a reasonable target? Or is the goal we are setting up for newer traders causing more harm than good? If it isn't a realistic goal, what is a better benchmark?
- SpeculatorSeth
Can you help answer these questions from other members on NexusFi?
Well, first just speaking about the raw return is not the most helpful unless we know the risk: drawdown allowed, number of contracts, daily loss limit, etc. For individual futures trader, a return in the 50% to 400% over a year is very possible. It is more useful to think about the return to drawdown. For example, a 2:1 return to drawdown with 100% return is much more reasonable then a 4:1 return to drawdown and a 100% return. However, most of the combines are far more difficult then they appear because the daily loss limits are very restrictive, drawdowns are minimal, and additional restrictions like trailing drawdowns make it even more difficult.
However, it is possible for individual or self-directed traders to outperform the hedge funds because (1) they can take on more risk and (2) they are trading much smaller notional values. However, it doesn't really mean they are better. For example, if a hedge fund running many strategies produced a 40% return with a 10% drawdown then that's a 4:1 return to risk. But more importantly, the "short fall" failure might still be a low positive return. If you compare this to say a futures trader, the "short fall" might be a very negative return. Because of the high leverage, it is possible to produce very high returns in futures and still not really exceed any sort of statistical significance.
As for whether or not some of these firms are really seeking the best traders as they claim to be, I am not so sure. Some of my experiences:
1. I took a real money ~100% performance produced over 2-3 month futures track record to one tryout firm some years ago. I received zero interest but I do get several emails for affiliate opportunities from this same firm today.
2. I came very close to passing but ended up failing one of these tryouts with an essentially break even balance due to the trailing max drawdown. I think I had a discount that month but certainly felt strange to fork over $100 (or whatever it was) when my account balance was essentially at break even.
3. For another firm, after failing for 2-3 months, I passed and well exceeded the profit target but then it was discovered I had went over the daily loss limit $7 but was not notified. This was enough to fail me. After complaining, they allowed me to pay to reset and keep partial profits. I exceeded the profit target again within a few days. On a day I had closed out over $1,000 and attempting to impress, I did make a serious mistake and hit the daily loss limit. I received zero follow up interest from this firm.
Yes, I generally believe it would be much easier to produce a meaningful return in a personal account without so many rules. However, the risks of trading actual futures can be very severe. So, I cannot say that these tryouts are always a bad deal. It is true that hitting a meaningful return (say 50% return over a year) would be much easier with an appropriate sized account and less leverage. On the other hand, if one wants to hit very extreme returns (say several hundred per day on a tiny account) where the risk is very high then these sorts of opportunities might present an opportunity. I do scan the offerings every few months and will consider to try again. The fine details are often important. I would add that the difficulty probably has to set somewhat high because of the high leverage in futures but it is usually the additional restrictions like the trailing loss limits, very low total drawdowns, etc. that make it more difficult then it would seem.
The trailing drawdowns are killer. There was a situation where I failed a combine, but kept it till the end of the month. I went on a run of $500, and then a further run of $2000 in the next combine. So I had a long enough period of profitability to pass, but split between two combines. Then I had a losing streak more than the trailing draw-down.
But what causes me to bring this question up is that some newer combines don't impose any such restrictions. Your only limits are the span margin requirements, and a 10% profit target at the end of the evaluation. However, I question if profitability of that nature is really sustainable for anyone trading a combine. You are unlikely to hit that performance target every month. You have to get a lucky run.
More than reasonable, but you can also lose 10 percent. I made 40 percent in the last few months on my personal account(small account).
If the new trader doesn't know how to trade and is going to wing it, they might as well save their money.
It's great and all to have these avenues for newer traders to get funded, but if there is no education or know how, we might as well call it gambling and call this paying for an expensive simulator. I am guess many of these firms are making money off new traders. Live market data and a platform is still probably as good and more cost effective(sorry not trying to distract from the topic).
It's a good idea to have some skin in the game, but I am doubtful many walk into the combines or other programs really knowing what they are doing.
Hell, I sim/live traded for 4 years until I had a clue what I was doing, then I was barely scratching the surface. I am on year 5ish and I scratched the service, still working through things.
Right, you are referring to earn to trade. Okay, it looks like you get a $25,000 virtual account. 60 day evaluation period. 2 months. You need to hit 10% on the $25,000 or $2500 in 2 months. It looks like current margin on the ES is $5800. So assuming you have a $5,000 DD then that gives $20,000 for margin divided by $5800 = 3 contracts. This seems very do able as you need to make only ~50% of your drawdown limit. The way I look at it it though is basically you have a 5k account, 3 contracts, and you need to hit a 50% return over 2 months. This might not be the only way to look at it but seems like one reasonable way to look at it.
On the surface, it seems like a reasonable to good deal. The biggest downside is the time limit and the fact you essentially are only getting 5k funding. The traditional purpose of prop funding is to be able to give you enough risk capital to trade for a living. The lack of a ramp-up is the biggest detractor for me.
The Top Step combine is about 6%. I am doing the 150k and the expected profit target is 9k for each step. Do I think it is reasonable? Yes.
Can you complete step one in the 5 days that are minimum? Sure, but I believe if you do it is mostly luck or a whole bunch of hours in front of the screen. At my current rate I estimate it will take me about 12 total trading days for step one. Mostly because day one put me down a little less than 1%. Since then it has been a slow steady gain on the days I actually trade it. Some people may be able to do it in 5 days but not this guy. LOL! I mean in step one technically I could put on 15 contracts and only have to make 120 ticks. But it also only gives you 40 ticks of going in the wrong direction before you are out for the day. I would be done with step one by now if I actually traded it every day. Sometimes I just focus on my personal account.
Step 2 is a bit more restrictive in that it limits how many contracts you can have on at any given time based on your current account balance. But even at the 3 contracts you start with on the 150k combine, reaching the targets is not that unreasonable in my opinion. Using just the lowest allowed contracts will take 150 points (600 ticks) if you trade NQ. To reach the target in 10 days would require you to reach 60 ticks per day. That also gives you a bunch of room for bad trades. At three contracts you have 200 ticks of drawdown available. In step two I will take it as high as 5 contracts as the account balance increases. No real need to go any higher.
In my opinion, plan on 2 months to complete the combine without throwing any hail mary trades out there trying to reach their profit targets. I think that is where many people mess up on these tests. They stress out about paying the "evaluation" fee for a second time. As long as you are making reasonable progress, I think it is worth it.
