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A few simple & easy steps to ensure never to fail a trading challenge or live trading.
this works for almost all Proprietary Trading Firms, the content below is based on EnFoid Proprietary Trading
First, you need to keep these things in mind.
If you can not accept and live with any of the points below,
better save the time and money for something else.
To effectively perform Risk management, you need to have two things in mind at all times.
These are the most important values to be successful!
Again: profits come by themselves. The job of the trader is to protect the Equity at all times!
if you know when/where you are wrong, you need to take action (e.g. Stoploss, Close positions, Scaling out, Hedge, … )
Prop Firms have a set of Rules to Guide Traders, EnFoid Fast-Track has a “5% Intraday & 10% Total” ruleset.
This is to protect the Funds the Firm will provide to you, not to make your life difficult.
These simple rules making sure you NEVER fail a Challenge or a live trading account.
Your balance today is $50000, which means your max loss for today will be $2500 or $47500 Equity.
If you risk 10% of the allowed drawdown on each trade, you can have more than ten losing trades in a row without breaking any rule.
Not enough? WRONG! 10% of $2500 = $250 == 0.5% risk for this trade!
0.5% is already a substantial risk when Daytrading money that is not yours!
Also, with just a 1:2 Risk/Reward, 10 profitable trades would already lead to completing the Evaluation.
If that is not fast enough for you, better go to the Racetrack and bet on some horse with 200:1 or some random crypto coins!
You trade with $50000 but you in a significant loss (let’s say 8%)
that means your Max loss objective is in effect, limiting your Equity to $45000.
at an 8% loss, your Balance is at $46000 with $1000 until the max loss is hit.
Risking 10% of the rest-Equity would mean your next trade will have a max risk of $100.
as you can see, it’s a bit less than half of what you can risk from example a.
even with a significant drawdown, the exposure is still moderate making it easy to recover.
If your account is not in a loss & no rule violation recorded, you can restart the test, unlimited times free of charge!
there is no need to overtrade EVER!
EnFoid provides a “Prop Indicator” for cTrader & Metatrader 4 where you can see the rest equity your current account has.
Divide the number you see by 10, and you know what you can risk in the next trade, yes it is that simple!
In combination with the Position size Calculator from earnforex.com and the PSC-Script (MT4/MT5 only)
you can make trades easy, without engaging in too much math.