Mark Douglas

“No trade has a guaranteed outcome; therefore,

the possibility of being wrong and losing money is always present.”

Considerations for Prop Funding

1. Do our Due Diligence
2. Develop a Business Plan
3. Develop a scalable strategy
4. Execute The Plan
5. Learn From Experience
6. Repeat the process

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There are many videos and theories as to which Prop firms and which plans are the best.

That’s up to each of us to determine according to our current needs.

• Time
• Money
• Expenses
• Profits
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Apex 50k account used as an example

Goal: Make $3,000 before having a drawdown of $2500 from Highest Equity Peak.

Trade for 7 days minimum

Any single Trade can only be a maximum ⅓ of profit goal.

Math

Profits required

$3000/ 7 days = 428.57 per day if perfect

$3000/ 3 days = $1000 max per day for efficiency if perfect

$3000/ 20 days = $150 on average NET profits per day

$3000/ 60 days = $50. On average NET profits per day

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Expenses

$167 x 90% discount = $16.7 per account first month
$167 x 80% discount = $33.4 per account second month + or when 80% sale

2 months expense = $50.10
3 months expense = $83.50

Don’t be in a rush.
Try multiple accounts at 80 to 90% discounts.

Develop a strategy for reliably making $100 a day with one account.
Be more aggressive with a few.

Assumption 80% discount for 50k account

$33.4 x 3 months = $100.20 per account

Try 4 evaluations = $400.80 per 3 months
$400.80 / 3 months = $133.6 per month expense on average

Take 3 months and pass only 1 account.
One time PA fee for 50k = $140 (this eliminates carrying cost monthly; no time pressure)
Net expense = $400.8 + $140 = $540.8

That is the acquisition cost of capital. We also have to factor in 3 months of only paper profits

If we have “blown” 3 accounts to pass 1, we can also assume we would have lost or been underwater ($2500 x 3 = $7500) of our own money.

This is clearly not a get rich scheme but a way to minimize losses while learning to trade with some defined risk

The learning curve is important. If we repeat the process four times, and make no further gains in efficiency, we can assume

4 cycles within a year we have accumulated 4 PA accounts.
No real net profits
Expenses are capped at $540.8 x 4 = $2163.2

Conclusion:

• These funding firms may be ideal for beginning traders who have little risk capital
• This system allows for the learning curve by spreading out $2500 risk capital over one year
• It is not a get rich quick scheme. The process needs to become scalable, so the assumption is it will take another year to acquire funds to withdraw
• Trade copiers can speed up the process, but used incorrectly can easily bankrupt 3 months of disciplined work
• It is scalable to 20 accounts in some funding firms. Do the math
• A few good wins with more risk can speed up the process.
• Learning curve. Becoming consistent at making $200 to $500 a day net without a drawdown of $2500 allows for much faster growth of our system.
• Make $50 a day at a minimum
• Expenses for our own live account needs to include costs of real time data. For Non-professionals, this is a huge savings with Apex, as our platform fee for NinjaTrader as well as our real time data fees are included in the evaluation fee. (For Topstep funded accounts, you are considered a Professional and required to pay $116 a month for data.)
• For traders who want to build a business in a reasonable time frame (1 to 2 years), with limited risk capital, and who don’t need this business for immediate income, this approach may have some merit.
• There is always a time value of money and a money value of time component.

“What is the Highest and Best Use of our Time and Money?”

That’s a personal decision, and one we all need to ponder.

Jesse Livermore

“People who look for easy money invariably pay for the privilege

of proving conclusively that it cannot be found on this earth.”