Disliked{quote}The problem with those direct funding, accelerated type programs where the buy-in fee matches the draw-down, is that you never really know if you are being given a large account to trade with. They could secretly match your buy-in fee with the same amount of funds, and put the combined funds into an account that has a lot more leverage (notice how the leverage on such accounts is always smaller?)Ignored
DislikedIf the above is true, and prop firms are simply matching your buy-in fee and throwing the funds into a high-leverage account, then you are still flipping/compounding your account in order to scale up with these accelerated-type programs. It's the same thing, except you are forfeiting half of your profits to them.Ignored
Once I reach the max account size with them, the max loss would be $53,333 or so to get booted out of the program. Obviously their risk is much lower than that, as it is padded by previous profits, but they still have some risk. Of course, once I've made enough profit for their 50% cut to cover that risk, they are basically risking nothing anymore, and neither am I. So all in all, it starts out with me risking some money and them risking nothing. Then as things succeed with a trader, they start risking some money with the trader risking nothing, but not a lot (unless they're over-leveraging on the back-end, tssk tssk!), and then finally, once the trader reaches the max account size and churns sufficient profit, nobody is risking anything anymore (save for black swan events) and the 50/50 split continues.
I guess my point is, I fail to see what the problem is with these back-end shenanigan conspiracy theories (true as they might be) unless they might be causing the firm to become insolvent. Now, based on some calculations I just made, it indeed may be faster, even a lot faster, to compound using one's own money... BUT, there are also disadvantages too. I'm thinking of different scenarios and how they might play out
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