Prop firm challenges: how many of you failed because of the loss limits?

New comment
How many of you have lost a prop firm challenge because of the loss limits (daily or maximum), and not because of the strategy?

And what would have helped you the most to pass? A clearer rule from the firm, an alert before reaching the limit, a fixed daily routine, smaller position sizes, or something else?

I am curious to hear different experiences.
Hi Amedeo,

I'm one of them. My EA setup ran through both phases for about 1.5 years, then a forex pair opened with a big gap over the stops. The daily limit was 5 %, the day ended at round about 7 %.
A grid EA on the same account was already sitting in floating loss, so the gap didn't have to do it alone.

An alert wouldn't have saved me. The gap came at the open, there was no time to react. What would have helped is knowing before the market closes how much all open positions together can lose if price jumps, not only what each single stop says.

Smaller size is the honest answer, but it has a catch. With EAs I had to cut the risk so much that the challenge would have taken forever. Thats the real conflict for me, the profit target wants speed and the daily limit punishes it.

Best regards,
Chris
Hi Chris, thank you, this is very useful.

A gap through the stop is a different problem, because the stop price is not the price you actually get. Two questions to understand it better: would one number for all open positions be enough, for a gap of a fixed size (for example 1% or 2% on every market), or would you want it per market? And did your firm count the gap loss against the daily limit even though it came at the open?

Also, the grid EA already in floating loss on the same account sounds like the real multiplier here.

For me the number that decided it was the worst day of the book, not the worst trade. I replayed one month of my own index setups across four markets, about 35 trades a day, and the worst single day came to minus 17.6 R. Red days were red almost everywhere at once, on one of them all seven of my Nasdaq trades stopped out. At 1 percent per trade that day alone is minus 17.6 percent, so I went down to 0.25 percent per trade to keep it inside a 4.5 percent cap. In my backtests cutting size also beat tightening the stop. A looser loss stop earned more but breached two to three times as often, while halving the size lowered the breach risk without costing expectancy per trade. Like Chris I doubt an alert would have saved me. What helps is one guard that watches account equity including floating, closes at a margin below the firm's number and scales size down as the drawdown grows. It cannot do anything about a gap though, so the worst day has to fit before the guard ever fires.

New comment