Hello Traders,
In this article, I want to analyze and compare the investment and risk of using PropFirms versus real accounts. Many wonder if it is better to use a PropFirm or a real account. The PropFirm industry has sold us the idea that by using a PropFirm we are not risking our capital, which is a half-truth. We are also told that the return and investment risk using PropFirms can be very profitable. I decided to put things into numbers to really compare which is better.
For this comparison, I used the performance of the BOT for NQ & ES CASH, and London. The period we need to analyze is six weeks to reach the profit goal in the PropFirms and receive a payout. This same period is used to analyze the real account to compare on equal terms.
Excel File ->
Comparison with PropFirms
In the Excel file I prepared, you will see three columns: EVALS, FUNDED, and PAYOUT. I consider that, for example, in TopStep you need to buy six EVALS, of which two will be funded and one will reach the payout. In APEX, eight EVALS are used, of which four will be funded and one will reach the payout. The difference is because TopStep uses a trailing stop at the end of the day, while APEX uses a dynamic trailing stop. This means that if your profits go up in one day, say 500 dollars, your new floor is now 500 dollars higher, making it easier to blow the account. That’s why more EVALS are needed to reach funded accounts with APEX.
Costs and Rewards
Costs are calculated using 50,000-dollar accounts in both cases, with their respective promotions and discounts, and considering a six-week period to reach the payout. In TopStep, the total cost is 592 dollars, and the payout is 1,500 dollars, as they allow withdrawing 50% of the profits. In APEX, the cost is 575 dollars, and the payout is 2,000 dollars.
An important point is the column REWARD minus INVESTED because what you receive is the payout minus the cost of the accounts. Unlike a real account, this money cannot be reused; it’s a cost. It’s hypothetical money like monopoly money where you receive a payout. The return on investment in TopStep is 1.53, and in APEX, it’s 2.48, assuming everything goes well and the APEX timelines are met. TopStep offers a lower return on investment, but it might be easier to achieve some gains in a few days, although I'm not sure if this compensates for the risk.
Point Goals
To calculate the point goals, I use the EVAL goal plus the value of the PA that we need to reach. In both cases, it’s 6,000 dollars, divided in half between ES and NQ to know how many points that equates to. In a six-week period, we need to make 60 points in ES and 150 points in NQ.
Comparison with Real Account
Now let’s look at the real account. I use brokers like Tradovate or NinjaTrader, which offer minimum margins of 100 dollars for MNQ and 50 dollars for MES. However, you can’t trade with just those amounts, as if the account drops to 49 dollars, it will be liquidated. Therefore, a buffer is needed. For MNQ, the buffer is 150 dollars, and for MES, it’s 100 dollars. These buffers allow for a loss margin of 75 points for MNQ and 20 points for MES. This margin might seem tight, but historically, we haven’t had consecutive days with such large losses. If we control losses and risk, this buffer should be sufficient. If not, we can increase the buffer by 50 dollars per contract for more security.
Investment and Gains
The total investment required to trade one MNQ and MES contract is 400 dollars, and the potential payout is 600 dollars in six weeks. Historically, the BOT has achieved an average of 3,000 dollars in this period, which equates to 300 dollars per micro contract. This return is comparable to TopStep, but with the difference that the initial capital of 400 dollars is yours and can be withdrawn at any time. In contrast, money spent on PropFirms is non-refundable.
Moreover, profits can be reinvested to increase capital. After six weeks, the capital could grow by an additional 300 dollars. For mini contracts, the minimum investment is 4,000 dollars, and the potential payout is 6,000 dollars in six weeks. With a realistic investment of 400 dollars, you can expect a payout between 300 and 600 dollars.
Conclusions
Choosing between using a PropFirm or a real account depends on several factors, including available capital, risk tolerance, and the ability to handle the restrictions imposed by PropFirms. While PropFirms can offer accessible ways to trade with a higher ROI, the costs and restrictions can affect the return on investment. On the other hand, a real account offers total control over operations and gains, but returns are lower compared to Props.
It is crucial to carefully analyze these aspects and consider our own circumstances before deciding which is the best option for our trading.
Key Points to Remember:
Excel File ->
PropFirms (TopStep and APEX):
- TopStep: Requires 6 EVALS (2 funded, 1 payout). Cost: $592. Prize: $1,500.
- APEX: Requires 8 EVALS (4 funded, 1 payout). Cost: $575. Prize: $2,000.
- Return on investment for TopStep is 1.53 and for APEX is 2.48.
- TopStep uses a trailing stop at the end of the day, APEX uses a dynamic trailing stop.
Real Accounts (Tradovate or NinjaTrader):
- Minimum margin for MNQ: $100, buffer: $150 (75 points of loss).
- Minimum margin for MES: $50, buffer: $100 (20 points of loss).
- Total investment required for MNQ and MES: $400. Potential prize in 6 weeks: $600.
- Initial capital is recoverable and profits can be reinvested.
- Maximum allowed losses for MNQ: 30 points per day.
- For MES, average of 10-12 points on a bad day.
- Historically, there are no consecutive days with such large losses.
- For mini contracts, minimum investment of $4,000 with a potential prize of $6,000 in six weeks.
Results and Prizes for Real Account:
BOT Performance:
- Average of $3,000 in six weeks, maximum of $6,300 (current data as of July 20, 2024).
- Equivalent to $300 per micro contract.
Updates for This Week
Version 16 of the Boot
Updates for NQ, ES, and MBT:
NQ
- Loss and Gain Strategy:
- Maximum of 2 consecutive losses.
- Maximum of 4 consecutive gains.
- Loss limit of 20 points.
Performance:
- Take advantage of days with long runs.
- Manually stop the boot upon reaching limits for better results.
ES Cash
- Strategy Similar to NQ:
- Maximum of 2 consecutive losses.
- If 400 dollars is obtained using a mini contract, the boot should be stopped.
Performance:
- Limit losses and maximize gains.
ES London
- Loss and Gain Strategy:
- One gain or one loss, whichever occurs first.
Performance:
- London has been the biggest contributor to profits recently.
- Use with mentioned risk.
MBT (Micro Bitcoin)
- Code Adjustments:
- Minor adjustments to optimize and start seeing gains.
Performance:
- Continuous improvements for optimization.
General:
- The boot does not calculate consecutive gains, only losses and gains. It is recommended that users manually connect and disconnect the boot when limits are reached for better results.
- The new version is distributed in a single zip file containing all four strategies for easier importation.
- Additional details will be posted in each strategy's room.
Thank you for your attention, and I wish you excellent trading.
See you on the Discord server.