It is surely clear that the Combine model is good practice/profit for the Combine company, but not good for the trader unless you understand to only work with 10% of the full account as your operating account. To be fair that is then a good way to discover discipline (or not) and may lead to great traders. But the Hmmm remains.
I agree about the statement that size is irrelevant. And I don't see a problem in 5k account. All you have to care about is risk. Why I need to deposit 30k and only trade with 1500 as my max loss? I would only deposit my max loss plus the margin, 5k, and this is it. If I blow it, having no margin/cushion to trade will only help to get time to cool down and rethink before your wire hits the trading account. What must be said through is you should not use your LAST 5k and swing for the fences going all margin you can get. But I prefer to keep 25k in the bank safe and only deposit 5k and trade it with the sizes I would trade out of 30k capital. It's simple arithmetic.
Absolutely, I would just use term "trading capital", not "trading account". I trade live in Forex for years and I would never deposit my whole capital with any single broker. It has no advantages or benefits, just downsides. Risks that broker will go down, risks that you may get mad and open huge positions against any risk management rules, etc.
But again, if you saved 5k capital and ready to risk it, and knowing if you blow up you can save another 5k to try again - it still makes sense to put that 5k capital at work. However if you have a large capital, or been given one, you have your max risk cap and you work from there differently. All those 1B$ funds we hear about rarely trade highly leveraged products like futures, they need that capital to work their positions and this is why they are geared for smaller profits and losses percentage wise. Just because you need that much capital for their strategies that are mostly illiquid and you can't use any leverage or it will be a very expensive proposition. I think those funds that trade in Futures or Forex with high leverage don't need that much capital and only get a part of it from their investors, but then their risks are much higher in relation to that part of capital and profits larger. But for investor it is the same - he would give for example 10M to a regular hedge fund and expect risks up to 10% before he pulls off, or he gives 1M to futures trading fund and risk it all. Result is the same 1M at risk.
And that is what TST is doing. So one must wonder, why are they talking about 30K,50K,100K etc account, when the real account what they are backing with is about 1/5th of that size??? It is as you stated, max. DD plus intraday margin multiplied by the max. number of contracts...Their 100K account can be traded with a 10K real account, if you trade the ES...
Last edited by Pedro40; April 1st, 2013 at 07:14 AM.
I guess because most people are primarily concerned with the account size, not absolute risk numbers. For funded traders they have account size set to 0.
Maybe someone has an answer to this question: their max DD is calculated in regards to the initial balance or from any peak balance you may have? I.e. if I have 30 000 balance and start making losses right away I can only go 500 usd down a day and 1500 at all. But what if I make 500 first? I understand that I still can only go down 500 next day (I believe intra-day gains are not counted) but what about max DD? Will it be 1500 from peak 30500 and therefore 29000 or will it still be 28500 and max dd is counted from the initial balance? Their writing on the website suggest the later, but I suspect it will be the former.
From the initial balance. That's why it is a good strategy to increase size once you have a profit cushion, both generally and daily.
Now it is said to be the same for the Live traders, but I disagree with it. Let's say you are trading Live with the 100K account and you made 8K. Then you start to lose. They say you are allowed to lose all the profit back and the max DD, but I say you should be stopped long before that. If you were up 8K and you lose 4K back, I would stop you and evaluate why the losses happened, but that is just me...
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