Max Drawdown vs Trailing Drawdown

Discussion in 'Prop Firms' started by GotherL, Jan 29, 2023.

  1. GotherL

    GotherL

    I know most prop firms (or at least that one I am in.) have a rule where if you make your Drawdown+$100 it would stop trailing.

    Now my question is do you still need to worry about the Max Drawdown or it would stop moving along with the trailing drawdown?
     
    murray t turtle likes this.
  2. DevBru

    DevBru

    Without knowing what company you are talking about its hard to give an answer.

    But anyway, i assume the answer will be in their FAQ.
     
  3. GotherL

    GotherL

    It's ETF.

    Apparently, it is not discussed in the FAQ that is why I am here. I emailed support but thought I'd try my luck here while I wait on their reply.
     
  4. DevBru

    DevBru

    ETF? Never heard of that funding company before. Can't seem to find them on Google either.
     
    murray t turtle likes this.
  5. GotherL

    GotherL

    Got my answer on a topstep forum.

    It stays at zero. Just what I needed to hear.
     
    murray t turtle likes this.
  6. GotherL

    GotherL

    ETF short for elite trader funding
     
    murray t turtle and Nobert like this.
  7. DevBru

    DevBru

    In their FAQ they use trailing draw down and maximum draw down in the same explanation, so i assume it's the same.
     
    murray t turtle likes this.
  8. SunTrader

    SunTrader

    Surprised they use drawdown + dollar amount and not percentage. KISS I suppose?
     
    murray t turtle likes this.
  9. %%
    It would be much more logical /profitable[for trader] to use %;
    but since most likely they rake off plenty in traders commisions + other fees;
    makes plenty of sense=$100.
    I'm surprised some daytrading companies have ever let them swing trade @ all; more profit sometimes for trader/ but less commissions for firm.....................................................................................................................:caution::caution:
     
  10. trade2020

    trade2020

    There are several reasons in my opinion that Topstep and other firms that have a rule where in your funded account if you make your Drawdown in profits (or in the case of the example you posted (if you make your Drawdown in profits+$100 it would stop trailing)
    are inferior funding solutions for traders when compared to other funding firms when, (and if), traders actually take the time to read and analyze the fine print and details of each firm.

    For example----Let's take a look at some of the details of the "live" funded account as that, in my opinion, is the most critical component --as that is how a trader is going to make his/her living if they have a goal of trading full time to support themselves and their family and using the "funding capital" of the provider firm to trade with. Now--I don't know about you--but what I would be looking for is a long term partnership whereby the funding firm provides perpetual funding that (as long as I trade within the rules) they will provide risk capital for me to trade with and that I am not "penalized" for withdrawing 100% of my profits every allowable pay period--meaning that I can with withdraw all profits generated each pay period and the next day still have the firm put up the same starting risk capital for me to have to trade with.

    Take a look at Topstep Payout FAQ at
    https://help.futures.topstep.com/hc/en-us/articles/1500008731241-Payout-FAQ


    WHAT IS THE PROFIT SPLIT?
    Traders will receive 100% of the profits from payouts, up to a total of $5,000. After the first $5,000 of funds have been received by the trader, the profit split will become 90/10, with the trader receiving 90% of payouts and Topstep retaining 10% of the requested payout. To be clear, this is per trader. If you receive a payout of $5,000 and then lose your Funded Account, your next Funded Account payout will be 90/10 when you start back up again.

    Once the payout request is processed, the Trailing Max Drawdown will be automatically set to the starting account balance (the trader cannot allow the account balance to reach or go below $0 after a payout).

    WHEN SHOULD I START TAKING PAYOUTS FROM MY FUNDED ACCOUNT?
    If you take any payouts before your Trailing Max Drawdown (TMDD) reaches $0, your TMDD will automatically be set to $0 with a payout.

    To maintain your Topstep account for an extended period of time and take regular payouts, we recommend making your TMDD $0 before considering a payout. To make your TMDD $0, you will need to reach the corresponding levels of profits (dictated by your account size):

    Below is a list of all account sizes and their corresponding TMDD for reference:

    Account Size: Trailing Max Drawdown:
    $10,000 (Swing) $1,000
    $30,000 $1,500
    $50,000 $2,000
    $100,000 $3,000
    $150,000 $4,500


    Now here is my opinion and interpretation of what the above means (if I am wrong then please correct and clarify)

    For this example we will use the $150,000 account size that has a TMDD (Trailing Max Drawdown) of $4,500

    You start you funding live account and in the 1st week you do not violate any rules and you generate $6,000 in profits. Your account balance now is $156,000. You then request to withdraw all $6,000.
    You receive $5,900 (100% of the 1st $5,000 + 90% of the $1,000 above the 1st $5,000) and Topstep keeps $100 (10% of the $1,000 above the 1st $5,000).


    "Once the payout request is processed, the Trailing Max Drawdown will be automatically set to the starting account balance (the trader cannot allow the account balance to reach or go below $0 after a payout)."

    Ok- the starting account balance is $150,000-- after withdrawing your $6,000 in profits your account balance is now $150,000 (which $150,000 is effectively the $0 line) Since you have withdrawn all profits and your account does not have any balance left above $150,000 (the $0 line) you have effectively "closed" your funded account as Topstep has taken away the funding below the zero line (below $150,000) so no more drawdown available and thus no more trading for you.
    The only way for you to have any "funding" is to keep your profits in the account (which still means the funding has been taken away) and if you decided to do that instead of withdrawing all profits then now you are trading on your profits only as the "funding" and now you are paying Topstep 10% of all profits you generate from that point on

    Compare that to say---FTMO

    Let's use the same figures as topstep for arguments sake and say that your FTMO account is $150,000 starting balance and you have a $4,500 max drawdown --in the case of FTMO it is considered a fixed max drawdown below the zero line (which $4,500 below $150,000 starting balance would be $145,500) --fixed-- meaning it stays the same even if you withdraw 100% of your profits every pay period

    You start you funding live account and in the 1st week you do not violate any rules and you generate $6,000 in profits. Your account balance now is $156,000. You then request to withdraw all $6,000. With FTMO your beginning profit split is 80-20 (you do have the opportunity over time to have
    that increase to 90-10 - SEE: https://ftmo.com/en/scaling-plan/
    You receive $4,800 (plus they also in addition refund your challenge fee whatever that was. After the payout - Your account balance is now $150,000 (the starting balance) however you still have the full $4,500 drawdown (their risk funding) to trade with.

    Whereas—-with Topstep as shown in the above example--if you withdraw all profits you would have no more drawdown available (i.e. no more funding from them on your funded acct to trade with)

    Also keep in mind that FTMO has a
    $200,000 challenge with a $20,000 max “fixed” drawdown
    And even their $100k has a $10,000 max “fixed” drawdown

    so why would you want to get a $150,000 Topstep Account with a “trailing” max drawdown especially if it is only $4,500 and as shown above—it goes away




    Also keep in mind that FTMO allows you to pass multiple challenges and either have multiple live accounts or they allow you to combine all the funded accounts into 1 large account (max at this time $400,000) which
    would then have a max total drawdown of $40,000 - meaning if you withdrew all profits to zero every available pay period you would still have the same starting $40,000 in risk funding from FTMO

    that’s quite a difference:
    $5,000 one time funding VS $40,000 recurring funding

    Imagine if 2 competing credit card companies offered for your business

    one credit card company says for a fee of "x" if you qualify we'll give you a credit line of $5,000 and after you charge $5,000 and pay it back to $0 balance we will then take away your credit line

    Versus

    the other credit card company that says for a fee of "x" if you qualify we'll give you a credit line of $5,000 and after you charge $5,000 and pay it back to $0 you will still have your $5,000 line of credit to charge again and repeat the process as many times as you wish as long as you stay within our rules

    So the "recurring funding" whether it is $5,000 or $40,000 as compared to "one time" funding is a big deal and big difference
     
    #10     Feb 4, 2023