First of, there are some prop firm you shouldn't be trading with if your style of trading doesn't support it [drawdown wise]. No matter how good you are, you would lose the account
As mentioned in my previous tweet, I highlighted six types of drawdown.
[1/x]
As mentioned in my previous tweet, I highlighted six types of drawdown.
[1/x]
I mentioned the six in no particular order and would love to rearrange them as
1. Overall Drawdown
2. Daily Drawdown
3. Equity Based Drawdown
4. Balance based drawdown
4. Trailing drawdown
6. Relative drawdown
To begin this thread, I would start with what drawdown means
[2/]
1. Overall Drawdown
2. Daily Drawdown
3. Equity Based Drawdown
4. Balance based drawdown
4. Trailing drawdown
6. Relative drawdown
To begin this thread, I would start with what drawdown means
[2/]
First of, nothing should make you feel bad for experiencing drawdown in trading.
We can refer to a drawdown as the reduction of one’s capital after a series of losing trades
Let’s say you have $100,000 and you lose $10,000
What percentage of your account have you lost?
We can refer to a drawdown as the reduction of one’s capital after a series of losing trades
Let’s say you have $100,000 and you lose $10,000
What percentage of your account have you lost?
The answer is 10%.
Simple enough.
This is what traders refer to as a drawdown and this brings us back to our original discussion.
To begin this thread, let's start with the Overall Drawdown which is also referred to as Maximum Drawdown or Total Drawdown
Simple enough.
This is what traders refer to as a drawdown and this brings us back to our original discussion.
To begin this thread, let's start with the Overall Drawdown which is also referred to as Maximum Drawdown or Total Drawdown
OVERALL DRAWDOWN
Let's say you're trading your personal account of $ 10,000, it's your money
You can decide to lose all of them which means you have a 100 percent Overall Drawdown but a prop firm doesn't give you that much to lose 😂
Prop firms are designed to make you fail 😂
Let's say you're trading your personal account of $ 10,000, it's your money
You can decide to lose all of them which means you have a 100 percent Overall Drawdown but a prop firm doesn't give you that much to lose 😂
Prop firms are designed to make you fail 😂
Imagine wanting to purchase a prop evaluation account and you see a 12 percent overall drawdown, what it means is that it at all you decide to lose, you shouldn't lose more than 12 percent of the original account balance given to you at the time of purchase.
What this means is that if you purchase a $ 100,000 account, 12 percent would mean your original balance of $ 100,000 doesn't turn to $ 88,000 over a series of losing trades.
Which means the day your original balance becomes $88,000 you lose the account.
Which means the day your original balance becomes $88,000 you lose the account.
Let's talk about the daily drawdown
Remember I told you that prop firm are designed to make you fail right maybe you can
DAILY DRAWDOWN
Just as I explained that the overall drawdown is the amount you're not supposed to lose over a series of losing trades
👇
Remember I told you that prop firm are designed to make you fail right maybe you can
DAILY DRAWDOWN
Just as I explained that the overall drawdown is the amount you're not supposed to lose over a series of losing trades
👇
The daily drawdown is the percentage amount you're not supposed to lose over a series of losing trades in a day
Let's say you purchased a $ 100,000 prop firm account with a 5% Daily Drawdown limit.
What this means is that you can only lose less than 5 percent
Let's say you purchased a $ 100,000 prop firm account with a 5% Daily Drawdown limit.
What this means is that you can only lose less than 5 percent
In this scenario, it means if you lose $ 5,000 trading in a day, you would receive a love letter from the prop firm.
Also, always put swap fee and commission into consideration as well cos your losses might just be 4,890
Imagine your swap and commission on that trade is 180
Also, always put swap fee and commission into consideration as well cos your losses might just be 4,890
Imagine your swap and commission on that trade is 180
You would have breached your account by just 70 dollars difference
Painful right.
That's why risk management is key.
My next thread would cover how to know how much you would be charged per swap should incase you hold trades overnight and what days you shouldn't.
Painful right.
That's why risk management is key.
My next thread would cover how to know how much you would be charged per swap should incase you hold trades overnight and what days you shouldn't.
Holding a trade from Wednesday to Thursday would cost you 3X swap fee.
How they came about this calculation of charging 3 times swap
I don't know but incase you decide to hold on Wednesday, know you would be charged 3 times as swap.
Swap fee would be a topic for another day
How they came about this calculation of charging 3 times swap
I don't know but incase you decide to hold on Wednesday, know you would be charged 3 times as swap.
Swap fee would be a topic for another day
EQUITY BASED DRAWDOWN
This is another type of a drawdown
In this case, you can refer it to as another kind of daily drawdown.
This can make you breach your account and you wouldn't know you've breached until you receive the mail from them.
Let me explain this
This is another type of a drawdown
In this case, you can refer it to as another kind of daily drawdown.
This can make you breach your account and you wouldn't know you've breached until you receive the mail from them.
Let me explain this
First of, look at the first image 👇
you're in profit, so your equity is the balance your account would be at if you decide to close. Meaning that if I close all my running trades now my new balance would be 25,080.
Let's refer to it as an imaginary balance.
you're in profit, so your equity is the balance your account would be at if you decide to close. Meaning that if I close all my running trades now my new balance would be 25,080.
Let's refer to it as an imaginary balance.
If you recall, I explained the daily drawdown as the original balance you have assuming you haven't placed a trade.
Let's say 5%
Now, in an equity based drawdown system.
Your balance would be [ your original balance + your floating profits]
I know you're lost and confused 😕
Let's say 5%
Now, in an equity based drawdown system.
Your balance would be [ your original balance + your floating profits]
I know you're lost and confused 😕
Lets say, your max daily loss reset each day at 10pm nigerian time.
Prop Firm have different time zones
What resets means is that, it's a new trading day already when the Sydney session opens.
Know your prop firm reset time and if possible convert it to your own local time
Prop Firm have different time zones
What resets means is that, it's a new trading day already when the Sydney session opens.
Know your prop firm reset time and if possible convert it to your own local time
Let's say you purchased a $ 100,000 account, your max daily loss will be set at 5% ($5,000)
If you end the trading day with a $3,000 and you didn't trade till the next day, your new account balance would be $103,000 and your max daily loss for the next trading day would be $5,150
If you end the trading day with a $3,000 and you didn't trade till the next day, your new account balance would be $103,000 and your max daily loss for the next trading day would be $5,150
Let's say on a new $100,000 challenge, you have a position open that is $5,000 in profit.
Let's say you hold till the close of new york session through the sydney session which is referred to as a new trading day.
Your daily drawdown would now be calculated as 5% of $105,000.
Let's say you hold till the close of new york session through the sydney session which is referred to as a new trading day.
Your daily drawdown would now be calculated as 5% of $105,000.
Daily drawdown is usually equity based or balance based and those prop would say depends on which is higher.
If you're in a floating profit till the next trading day, know equity balance would be used
If you're in a floating loss, your balance would be used as your daily loss.
If you're in a floating profit till the next trading day, know equity balance would be used
If you're in a floating loss, your balance would be used as your daily loss.
Back to my original explanation of the equity based drawdown.
5 percent of $ 105,000 is $5,250.
If you equity goes below $ 99,750 (105,000 - 5,250), you would have breached your account.
This is more reasons why an equity based drawdown prop firm won't benefit a swing trader.
5 percent of $ 105,000 is $5,250.
If you equity goes below $ 99,750 (105,000 - 5,250), you would have breached your account.
This is more reasons why an equity based drawdown prop firm won't benefit a swing trader.
I hope the explanation of the equity based drawdown was easy to understand.
What prop firm can I trade with if I'm a swing trader or a position trader.
Recall, a swing trader could be on a $5,000 floating profit and the next 5 days, they are in a floating loss of -$350.
What prop firm can I trade with if I'm a swing trader or a position trader.
Recall, a swing trader could be on a $5,000 floating profit and the next 5 days, they are in a floating loss of -$350.
With the example above, they would have breached the account since without them knowing whereas they didn't risk much as its within their risk parameters but equity based drawdown would be a reason for them to get breached as your profit moved from $ 5,000 to - $350
BALANCE BASED DRAWDOWN
The drawdown a swing trader or someone who holds trades for 2 or more days should focus on should be a balance based drawdown.
As the name implies, this is usually calculated same way you calculate the daily drawdown.
The drawdown a swing trader or someone who holds trades for 2 or more days should focus on should be a balance based drawdown.
As the name implies, this is usually calculated same way you calculate the daily drawdown.
If you like hold a floating profit of $ 20,000 on an $100,000.
As long as you haven't closed that particular trade, your 5% Daily Drawdown each day would be (5% of 100,000).
Let's say you swing trade and that floating profit of $20,000 is now $3,500
You're scared right 😂
As long as you haven't closed that particular trade, your 5% Daily Drawdown each day would be (5% of 100,000).
Let's say you swing trade and that floating profit of $20,000 is now $3,500
You're scared right 😂
An equity based drawdown prop firm would have sent you a mail since that you have breached but in this scenario, you haven't breached yet cos your account balance or equity hasn't gone below 5% of $100,000.
You would only get breached when that profit of $ 20,000 is now -$5,000
You would only get breached when that profit of $ 20,000 is now -$5,000
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So I'm typing this and trying to add other drafts here 😂
Twitter only allows me to have up to 25 thread max so I would be continuing here shortly so sorry for the inconveniences
So let's continue with trailing drawdown
Twitter only allows me to have up to 25 thread max so I would be continuing here shortly so sorry for the inconveniences
So let's continue with trailing drawdown
That's why I like @thefundedtrader
The have several drawdown types which is depending on the account type you purchase and they also get to explain it well on their faq.
If you wish to purchase account type A, check faq of type A but some prop firm keeps this rule hidden
Smh
The have several drawdown types which is depending on the account type you purchase and they also get to explain it well on their faq.
If you wish to purchase account type A, check faq of type A but some prop firm keeps this rule hidden
Smh
Now back to trailing drawdown
TRAILING DRAWDOWN
This one is very very funny tbh 😂
If I see a prop firm that would make use of this, I would first run away.
A trailing drawdown is a drawdown that is pegged to your positive account performance.
TRAILING DRAWDOWN
This one is very very funny tbh 😂
If I see a prop firm that would make use of this, I would first run away.
A trailing drawdown is a drawdown that is pegged to your positive account performance.
That means that if you increase your profit by $1,000, then your trailing drawdown will also rise by $1,000.
I find this as a trap and wouldn't want to continue with it if I was funded or about to purchase an account with this type of drawdown.
Anytime you're in profit:
I find this as a trap and wouldn't want to continue with it if I was funded or about to purchase an account with this type of drawdown.
Anytime you're in profit:
For example, in a $100,000 account your starting trailing drawdown is $98,000.00.
On your first trade as you make $1100 in profit it will bring your account balance to $101,100 This correspondingly raises your trailing drawdown to $99,100
Imagine being trailed when in profit
On your first trade as you make $1100 in profit it will bring your account balance to $101,100 This correspondingly raises your trailing drawdown to $99,100
Imagine being trailed when in profit
The last one is relative drawdown
I got the drawdown type on the knight challenge of @thefundedtrader
Nothing would make me take this challenge type tho 😂
I got the drawdown type on the knight challenge of @thefundedtrader
Nothing would make me take this challenge type tho 😂
It's almost similar to trailing drawdown if it's not.
What this means is that, you get a new Overall drawdown whenever you're in profit.
For example, let's say you purchased $100,000 account, and you were given a trailing or max drawdown of 7%.
Next slide
What this means is that, you get a new Overall drawdown whenever you're in profit.
For example, let's say you purchased $100,000 account, and you were given a trailing or max drawdown of 7%.
Next slide
If it was an Overall Drawdown, once you lose 7,000 or your account gets to 93,000
You would get a mail. But let's say you make a profit of 7 percent 😂.
Your new overall or max drawdown would be 100,000 instead of the original 93,000
You would get a mail. But let's say you make a profit of 7 percent 😂.
Your new overall or max drawdown would be 100,000 instead of the original 93,000
Imagine going in a losing streak and you're thinking 93,000 is your buffer not knowing 100,000 is your buffer.
I feel this challenge type is to restrict or make your risk management strong.
I feel this challenge type is to restrict or make your risk management strong.
Okay, this is the end of the thread and if you're here, you can see the beginning of it here
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