Discussion of article "Take a few lessons from Prop Firms (Part 1) — An introduction" - page 5

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An informative article highlighting common mistakes and setting realistic expectations.


Thank you Fernando.

 

I reread the article again. Why does the author confuse balance and equity? Quote:

- ... The maximum drawdown should not exceed the maximum percentage of the initial balance.

Depending on the company and type of programme, the percentage varies between 4-12%. Let's assume your initial balance is USD 10,000. The maximum absolute drawdown is 8%. In this case, your equity cannot fall below 92% of your initial balance. In other words, your balance cannot fall below USD 9200.

...Determine a lower limit and never allow equity to fall below this level.

 
Alexey Volchanskiy lower limit and never allow equity to fall below this level.

There is no misunderstanding. Many proprietary firms specifically define a maximum drawdown based on the initial balance and ignore any subsequent drawdown based on equity.

Some other proprietary firms have different rules and apply a rolling drawdown based on equity rather than the initial balance.

So no, the author, that is me, didn't get anything wrong.

However, there is a "typographical" error here and it should have read "Namely, your equity or balance cannot fall below $9200."

And by the way, I'm not Brazilian (I'm from Portugal) and the original article was written in English (it's my first language as I lived in an English-speaking country for 20 years in my youth).

(automatic translation from English is attached)

There is no misunderstanding. Many prop-firms specifically define the maximum drawdown based on the initial balance and ignore any trailing drawdown based on equity.

Some other prop-firms have different rules and apply a trailing drawdown based on equity instead of initial balance.

So no, the author, that is me, confused nothing.

However, there is a "typographical" error and it should have been "namely one's equity or balance can't drop below $9200".

And by the way, I'm not Brazilian (I'm from Portugal) and the original article was written in English (which is my first language as a lived in an English-speaking country for 20 years in my own youth).

EDIT: Also, ChatGPT did not write this. I take pride in what I do myself, whether it's writing or programming. And I really hate it when people use ChatGPT to do it. If that's not interesting enough for you, then don't read or comment.

EDIT: Also, ChatGPT did not write it. I pride myself for doing things myself, be it writing or programming. And I actually hate when people use ChatGPT for that. If it is not interesting enough for you, then don't read or comment on it.

 

The truth is that 90% (maybe even all 100) of these forex prop companies are fake. They themselves admit that after passing the challenges a trader does not get a real account, but trades on a demo and if he does not violate the conditions, he gets a reward. They are sort of designed as a training platform, not as a broker or forex brokerage centre. Accordingly, the winnings of traders who fulfil the conditions are paid out of the money of those who did not pass the selection, according to the principle of a financial pyramid.

 

Chronology of the development of "prop forex companies" in one month, even Metaquotes got involved



 
Great article. Good job! 
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