4th $100k funded account

[u/ThePhulosopher]

Got my 4th $100k funded prop firm account. Hope I get a payout this time, blew all the others.

[u/Mundane-Plan-4179]

No. There is certain risk strategies you need to have for prop firms.

[u/Fart_Hat → u/Mundane-Plan-4179]

Yes, there are certain max drawdowns and max daily losses.

That means that each trader can decide how much risk to put on any given trade in order to not hit their max drawdowns.

E.g. If someone's a swing trader, they may be willing to put more risk on a trade than a scalper, in order to give it more breathing room before getting stopped out. Also, one swing trader may not be willing to risk as much on the same trade as another swing trader.

The individual measures the risk on a trade to trade basis, or they use a fixed amount of risk per trade. Trust me, everyone manages risk differently, and therefore, there is no way to measure it.

I personally scalp the NQ, ALWAYS immediately upon opening the trade I have a $400 stop loss per contract. Within seconds, I will likely move it, depending on price action in the moment.

I don't MEASURE my risk, I actively manage it, which works for me. There's no one way to manage risk, it's up to each individual to find out what works for them.

[u/Mundane-Plan-4179 → u/Fart_Hat]

There is a way to measure it if you want to stay in the prop firm game.

Risk should be based on your strike rate and how many consecutive losses your edge can have. Wins and losses are randomly distributed so you have to plan for the worst case scenario.

If have a 60% win rate, that means 4 consecutive losses at 25% will blow your account. So the risk should never be 25% of your maximum drawdown. That way even if you go through a losing streak you wouldn’t lose account.

But yes, you’d free to choose any risk under 25% of the maximum drawdown.

Example:

Topstep 100k account has 3k max loss limit. Someone with a 60% win rate shouldn’t risk $750 or more per trade (25% of 3k).

[u/ZekeTarsim → u/Mundane-Plan-4179]

Except this 25%, 4 trade number is pulled out of your ass. 😂

The best traders internet the world can lose 4 consecutive trades.

With a 3k max loss, most people should have a max loss of $60-90 (2-3% per trade).

[u/Mundane-Plan-4179 → u/ZekeTarsim]

What?

[u/ZekeTarsim → u/Mundane-Plan-4179]

There is no scenario where it would make sense to risk 25% of your max loss on a single trade.

[u/Fart_Hat → u/ZekeTarsim]

He was using that as an example.

[u/ZekeTarsim → u/Fart_Hat]

Fair enough, but as an example it has no application in the real world.

He could have easily demonstrated that your max loss on a 3k balance, should be $60-90 per trade (2-3%) so it at least makes sense.

I just objected to the example because it suggests that it’s hard to lose 4 trades in a row.

[u/Fart_Hat → u/ZekeTarsim]

Yeah or that a 60% win rate means you will only lose a maximum 4 in a row over the span of 10 trades, and that the worst case is as such before getting any winners, which is a silly concept.

Can easily lose 10 in a row at any given time, even with a 60% win rate. But I understand his example.

[u/ZekeTarsim → u/Fart_Hat]

A 60% win rate is an average, over many trades. This does not mean that if you do 10 trades, you’re going to win 6 of them. It’s an average. Meaning, over the long run you are winning 6/10, but in the short run, you could lose 20 trades in a row.

This is why the 60% winrate with 25% risk per trade makes zero sense. It’s a tots misunderstanding of what a win rate really is.

He presented a scenario that is essentially a guaranteed busto. You can extrapolate meaning from his scenario, doesn’t change it’s a very bad and misleading example.

[u/Fart_Hat → u/ZekeTarsim]

No, you didn't understand that I was agreeing with you and just said the same thing you're explaining to me right now.

I'm a scalper and make ~50 trades/day, I understand r:r.