With the recent surge in popularity of online prop trading firms, it's still not clear what the statistics are behind % of people getting funded, the success rate of individuals who may make multiple attempts at getting funded, the stories behind individuals' funding journeys, or what people are experiencing after actually getting funded. I will try to shed some light on this with my own experiences so far.
One thing is apparently clear however- that it's difficult to get funded "the right way", i.e. following the rules (that often come with conservative drawdown limits or other stipulations), and subsequently maintaining the trading cadence after getting funded. The "wrong way" would be catching some outlier move in the market and meeting all the criteria in an instant, then being left out in the wild with the firm's real money, only to find yourself lost in how to duplicate one's initial success (unless capitalizing on outliers is your trading edge). There are a few dynamics that I've experienced in my journey so far (the past 4 months), and I thought I would share some of them for those who might benefit.
Without mentioning the name of any specific prop firm, what I've gathered so far this is:
- You need to actually adjust your trading style to cater to the rules of the firm. The rules may not be the most optimal for your particular trading style or may even sabotage your ability to be profitable altogether, but they're in place to protect the firm against rogue trading that may jeopardize firm funds or from trading schemes meant to game their payout system.
- There are some shady firms who seem to be in the business of just collecting trial fees, but I've been able to avoid them.
- Going through a prop trading firm is comforting for two reasons - even though you're still an individual retail trader, you're within a system with well-defined rules that are often hard to enforce by yourself. There's also alignment with the firm on your incentives (i.e. everyone does well if you do well), so you're part of a hidden team whose bonds may strengthen as you mature as a reliable trader. The second reason is that you're shielding yourself from debilitating outlier losses, and flushing out bad habits during the trial period with relatively small financial downside (reset fees for example). With one's own account, there's always the risk of going on tilt and losing it all on any given day/week.
- One still experiences the range of emotions in the trial period associated with "live" trading in a real account, which is great since you can see exactly what triggers you to deviate from good trading habits before capital is at stake.
- Going live with a funded account can be a surprisingly easy transition since the platform, instruments, and look and feel are all the same as what they were during the evaluation/trial period.
- It's also just as easy to get unfunded, i.e. crash one's funded account, as you yourself haven't changed much either, i.e. getting funded doesn't suddenly make you an impeccable and responsible trader. If you had "bugs" in your trading habits that weren't flushed out earlier, they'll show up again to sabotage your post-funding success. This is a bit more costly since you will have potentially spent more fees to get funded, not to mention the time and effort you'll have to spend to get funded yet again. The good thing is that getting funded again will be a re-validation of your skills, a small confidence booster.
Once funded:
- It's extremely important to take your time, pace yourself, set realistic profit expectations per day, take necessary breaks, etc. since the world is at your fingertips with more money under your control than you've potentially ever seen before.
- It can be tempting to try to take advantage of market volatility with size when you suddenly have so much leverage with little downside to your own capital, and it can also be surprisingly frustrating to see opportunities fly by you since you may find yourself feeling entitled to larger profits at this point.
- In reality, you are now in a different category of trading altogether. You're not trying to ramp up a small account as you may have previously been trying to do --you've already "made it" in a sense, and the name of the game is to not make boneheaded mistakes that will take you back to square one. Practiced daily, good trading habits will allow you to shine as consistency is highly rewarded.
- It's very important to recognize that your PnL is not correlated with the market- you are now on your own journey, so you can make money in any given market. This inevitably means forgoing profits on huge days, since you're likely not optimized to buy and hold if you're also making money on relatively choppy markets.
Hope these insights help. Good trading!
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