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The Magic Money Tree

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“Why can’t I withdraw all my profit?”

We get this question regularly and we want very much for people to understand our programs but this question suggests a misunderstanding of how prop firms work and the answer to the question can’t be handled with a simple statement.

There are a number of different prop trading models, no firm runs exactly the same model and the rules for each firm are usually different. Prop trading firms give trading capital to traders for them to trade with the prop firm accepting the loss risk.  The massive giant elephant in the prop trading room is the fact that the majority of traders fail, so giving capital to every trader would be a very quick route to bankruptcy. Given this fact, it’s clear prop trading firms have to create programs that mitigate and manage the risk.

Demo or Real Prop Firms

Prop firms generally fall into two categories: demo or real. 

  • Demo – Need large numbers of failing traders to build a pot of money that they can pay out to winning traders. 
  • Real – Use real trading funds to pay winners.

Both models have a level of risk. Due to the outsize value of withdrawals versus account fee, the demo model requires a very high number of failing traders to pay the much smaller number of winners. But to run this model you must have a seriously large number of clients that fail. 

 

Failing to make Money

 

The biggest firms such as FTMO and MFF have massively high numbers of traders and can easily run using the demo model. When you look closely at their published figures you will see that less than 2% of accounts ever get to withdraw. 98% fail. They are able to sustain this very poor success rate with rules designed to ensure this percentage does not rise. The primary rule used to limit traders is time based. Traders are forced to complete within a set period. Both FTMO and MFF have a static drawdown even after withdrawal. We are dead against time limits that result in high trader failures. 

 

Smaller companies that run this model have a different and potentially more difficult problem to overcome. It takes a very large number of customers to pay one significant winner. And due to the unpredictable nature of the business these companies could get a very successful trader at any time. Big payments may in this case be difficult and there have been a number of prop firms that have been forced to close without making these payments to the traders.

 

Real Account Prop Firms

 

Prop firms that place traders in the real market have an advantage in this respect. If you as a trader make a good deal of money and want to withdraw, the money exists, it’s real and is in a trading account. These firms don’t need massive numbers to pay winning traders. 

 

The problem for real market prop firms is that real money can also be lost by traders and therefore these firms have to have rules that limit this risk. These rules do not necessarily have to penalize traders more than the rules used by the demo firms. In fact they can be designed to filter out the best traders, ones that are more likely to go on and continue winning. Here is where the key difference between the two prop models exists: Lots of good winning traders are good for the real model prop firms and bad for the demo model prop firms.

Doesn’t Grow on Trees

 

So back to the original question: “Why can’t I withdraw all my profit?” Our real account model has a success rate far higher than FTMO and MFF. This is achieved by giving traders the space and time to trade however they want but with a relative drawdown instead of static drawdown. This drawdown moves up with a trader’s success and locks in at the account balance. It works with traders rather than against them. It’s not static and cannot be reset back. Our money does not grow on trees and this is how we manage the risk on the account. If you withdraw back to the account balance and expect us to take your risk back on then you will need to pay for a new evaluation.

Please don’t ask us to “do what FTMO or MFF do, and have a static drawdown”. We have no interest in running a failure based prop trading firm. 
You have a much higher chance of succeeding with us than you do with these firms. Just look at the numbers. 

How our Professional Prop Traders Manage their Account for Long Term Income

We now have a good number of traders that have managed their accounts successfully for a number of months and are able to take regular withdrawals. Prop trading is for them a profession and if they continue working in the way they do, they can expect to earn a good and high income over a long period of time.

These traders have usually focused on their long term goals rather than earning short time high payouts. They are not too concerned about the first 10%, they are concentrating on the next 10% and the 10% after that.

“This is my job now. The more I build, the bigger is the space to pay myself, even if my trading has a weak period.” FT+ Prop Trader

Taking Responsibility

Managing withdrawals is the trader’s responsibility and these traders make sure they reward themselves reasonably regularly, but they make sure they leave enough in the account to buffer a potential downturn in their trading.

Build a Buffer

We regularly see traders who initially do really well and make a good deal of money, their confidence is high and they quickly withdraw a large proportion of this profit and this makes them very happy. But the truth is, no trader will keep winning and keep winning, every trader will have a downturn at some point. The traders who have not built themselves a buffer inevitably suffer.

Professional prop traders understand that, like markets, their winning streaks will go up and down and consequently they manage their withdrawals with an eye to protecting the account for future income.

The more you understand your personal trading and your trading statistics the better you are able to manage your account. What is your average win rate, what is your risk:reward ratio, what is your risk of ruin, what is your max risk per trade? 

It’s not up to us at FT+ to tell traders what they can’t or should do. But we do try to help and give advice whenever asked.  Please feel free to contact us via our support ticket. support@fundedtradingplus.com

Further Reading

FTMO Vs FT+

  

 

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