Prop challenge account recovery journal

How I am recovering a prop account that swung down to over -2%

Scalping my way to 2% per day

On a mission to recover my prop challenge account from over 2% down with 3 days left of the trading challenge, I set out to scalp the majors from key liquidity areas.

The account was actually up 4.5%, after 10-15 days, with a maximum drawdown of 1% at the time. The kind of optimal trading results I was looking for. But then I came back to my desk one Tuesday morning feeling very tired for various reasons, and started to eat into those profits by taking careless trades in the wrong places, i.e. not in liquidity zones or key areas. I did the same the following day and before long the account was below zero and I was on full tilt. Even if I thought that I had a handle on it, I knew I was being rash. I came back to my desk this Monday morning after making sure I was being honest with myself, was well rested and also slightly detached from the emotion of winning or losing, just following the system as planned. And actually as it has evolved through the challenge, giving lots of confidence as the wins stack up and the losses do little damage.

Throughout the day I over and under committed but found the sweet spot of 2 lots with tight stops moving to break even quickly. The benefit of using these key liquidity areas is that you can have really tight entries and so your higher risk position size has less adverse effect if tapped. I was happy with stop loss values of around $50 (2.5 pips!) which would enable me to take up to 4 trades to attempt to catch a reversal into the trend from a key area using only 0.5% of the account in the process. The alternative is wider stops and scaling in 2-3 times.

There were times when discipline slipped and I moved the stop, sometimes quite significantly and I also reconsidered my entry point with a trade currently in drawdown and added again from the top of the new liquidity zone. This was a particularly risky situation which in the end did go in my favour. I wouldn’t usually take such risks, at least I hope, but as mentioned in a previous post the prop challenge forces a certain style of high risk yet low risk-management style to pass the challenge. Which unfortunately is why it is such a good business model for the providers.

By the end of the day I had actually made 3 to 4% over the day, but also made many poor decisions that lead to 2 to 3% of that being wiped off. With only 0.5% left to recover over the next 2 days I am now confident that the free retry offer will be in place shortly.

The other problem with scalping, aside from the exhaustion and stress, is the cost of commissions which amounted to nearly half of my profit today. As mentioned, I could have done better by leaving certain trades on for longer and enduring slightly deeper pullbacks in profit but the idea was to take off good returns as they arose. This would have solved the commission problem and also would have stopped me over-trading so there is something to be said for the 15-Minute bar analysis and 1-minute bar entries, potentially changing the timeframe back to the 15-Minute chart to avoid overly managing each trade.

So for the last 2 days of the challenge I will do as follows: pick the best liquidity areas either with the trend or within the range and and only take a maximum of two entries, while allowing them to play out to their fullest extent, without micromanaging the trades.

I should probably only need a handful of trades to get the retry offer, which just means being above 0.

So tonight I’ll get some good rest and hope for more volatility in the markets tomorrow.

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