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Dear Michael,
My name is V., and I am an aspiring trader from Romania, currently living in The Netherlands.
I’m emailing you because I would like your opinion on something, and I’m seeking your opinion because you’ve been a great inspiration to me. My trading style and system owe much to you and Tom Basso, with whom I corresponded a bit and who also helped me with my trading system. Your book “Trend Following” and your podcasts have significantly influenced my trading and personal development. Your evidence-based, confident, and no-nonsense attitude, along with your libertarian worldview, have made me a better and more confident trader (and person!). Trend following fits my job in the biotech sector as well (long hours and mentally demanding), as it allows me to manage trades in the evenings and frees me from constant screen-watching during the day.
So what I wanted to ask is, what is your opinion/stance on prop firms, or, to be more accurate, funding firms such as FTMO, the 5%ers, etc.? Do you think this is a good way to go about if one has only a small personal trading account and wants to add to it to reach a point where he/she can make meaningful profits without taking huge risks?
I know that most of these firms ultimately profit from failed traders who pay the fee but fail the challenge. Of course, they need a small number of successful traders too, who receive payouts in order to prove their legitimacy (I guess like a casino). However, they have so many rules and it seems really tough to trade with them as a trend following trader, even though I adapted my system to a certain extent to fit their rules. My trading system is very simple and is based on determining the trend on the daily chart (using either price action and/or a moving average), and using ATR and/or Bollinger bands to determine my SL and position sizing/risk. One prop firm rule that my system cannot deal with is trailing daily drawdown which resets every day based on your equity. I cannot deal with this because if I am to let my winners run, I need to give quite a bit of space for price (and, therefore, for my unrealized P/L) to fluctuate from one day to another. Nevertheless, there are some firms out there who do not have this daily trailing drawdown, but they are a bit less reputable, for example Crypto Fund Trader, or The Funded Trader (who shut down operations for a while and screwed a lot of customers, including myself).
Growing an account of only a few thousand dollars is pretty challenging, and I see the prop firms route as one of the very few viable options to add significant sums to my personal account at the moment. It might sound like biotech pays well enough for me to deposit large sums every month, but it doesn’t, especially in the Netherlands where everything is very expensive. I also tried approaching a few actual proprietary trading firms, but they seem to want someone who’s already a pro or very good at math, and I am neither. Also, they seem to dismiss trend following and believe that HFT is the only way to make money, which really frustrates me.
So, again, I would love to hear you talk about this, prop (funding) firms and your opinion on this, or other routes underfunded trend followers can follow to make this a full-time endeavor. I would love to hear this in a podcast, and also I’d be very happy if I would get a reply to this email. Of course, I imagine that you are very busy and also receive a lot of emails, so I understand if you don’t reply to every single one of them.
And if I may dare a more personal question, what personality trait or habit (learned or otherwise) would you say that was very important for you to reach success? Of course there’s almost never just one thing that leads to success, but if you had to name a trait or habit of yours, what would you name?
I am asking this because I grew up with the myth that if you study hard enough, get a university degree, get a good job and work hard, you will be successful, but I came to realize that that doesn’t make you successful. It might make you a high earner, but most high earners I see around me are working their life away doing something they don’t enjoy and are stressed all the time. This doesn’t quite look like success to me. Success to me is financial independence, doing your own thing and loving the thing you do, and having the freedom to live where you want and structure your life the way YOU want, just like you and other people I admire.
I’m sorry if this last question is too personal or too much coming from a stranger, and feel free to ignore it of course.
In any case, I would be honored to hear back from you!
All the best,
V. C.
Prop firms are a dead end. They restrict you to very tight draw downs. Will never work.
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