The truth about prop firm challenges (FTMO, My Forex Funds) - YouTube

Online prop from challenges  don't work how you think they do.  

After this video, you'll view them in  a completely different way. Let's start  

with an example. Say you have two challenges, one  with a profit target of 10% and another with 8%.  

Which is easier? What about if there's a  challenge where the profit target was 100%  

so you have to double your account in 30 days?  It's easy to think the 8% target is the easiest  

but the reality is that the difficulty of a  prop from challenge relies on many other things.  

Including maximum drawdown. Or more importantly,  maximum drawdown to profit target ratio.  

Let's take the FTMO challenge for example with a  10% profit target and 10% maximum drawdown. This  

is a drawdown to target ratio of one to one  meaning for every dollar of maximum drawdown  

allowed you have one dollar of profit target that  you must make. If a different challenge had an 8%  

profit target but only had five percent maximum  drawdown the ratio would be one to one point six,  

meaning it's actually hard to pass. But what  about a challenge where you have to double  

your account but had a 100 drawdown limit. Well  actually, this has the same one to one drawdown  

to profit target ratio as the FTMO challenge so  it is the same difficulty. It could be argued  

that this is exactly what the FTMO challenge is  as on a 100k account you only have 10k of drawdown  

which you must use to make 10k profit. Here are  the drawdown to profit ratios of some popular  

plot firms in the industry. As you can see My  Forex Funds has the lowest ratio, so it's the  

easiest target. Obviously there are other factors  that go into choosing a prop firm like the cost,  

but if you can get funded most firms refund the  evaluation fee. But when you have funded how  

much money have you actually been backed by? Is a  100k funded trader actually a six-figure trader?  

On an FTMO funded account if you were to risk one  percent of your account per trade you're actually  

risking ten percent of your ten percent draw down.  This is why maximum drawdown is such an important  

factor when choosing a prop firm. That multiplied  by the size of your account is how much you can  

afford to lose before your account is gone, so  it's the true value of money that you've been  

backed by. The only difference is that you have  the buying power of the original account size,  

but this can lead to over leveraging of the  balance that you're actually allowed to lose.  

Many traders also complain about the max daily  drawdown that many prop firms in force of five  

to six percent but this is equivalent to losing  more than fifty percent of your true backing in  

one day, which should never happen if you  realize this and use sound risk management.  

So knowing this, should you even join  platform challenges and try to get funded?  

If you're enjoying the video a like in  the sub would be massively appreciated.  

While prop firm challenges might not be what they  first seem, there are some incredible positives  

for getting funded. For a start, once traders  receive their first profit split and free refund  

they are completely risk-free. Also free retries  means traders who are confident in making at least  

some profit each month can keep retaking the  challenge until they reach the profit target at  

no extra cost. Then once funded, while traders  only have a small amount of the account they  

can actually lose, because they are risk-free of  their own money they can use more aggressive risk  

management to make larger profits. The account  scaling plans then allow consistent traders to  

earn even more funding at no extra cost. But  remember in order to earn a profit split and get  

your money back you need three months of profit in  a row and as shown by my last video the number of  

traders who actually achieve this is extremely  low. For experienced traders prop firms offer a  

great opportunity to increase their profits and  reduce their risk but for inexperienced traders  

trying to get funded will be a hard lesson that  they will learn when they lose their money.  

If you enjoyed the video make sure to like and  subscribe for more content on the prop firm space.