Starting a prop challenge in 2022

Considerations for starting a new prop firm challenge in 2022

Prop challenges in 2022

I still want to trade for a portion of my living. I haven’t done it yet, despite 5 years of learning now. I could have compressed that learning time and just got started, but my circuitous path has involved learning a lot about automation along the way. I feel this might help in the long run, given the consistency requirements of trading. More on that later.

So I want to consider another prop challenge, based on my “final form” of the currency strength setup.

It’s weaknesses have now been largely resolved (reversals in trends, breakouts in ranges) through filtering and risk management - breakout ranges mapped and feeler entries. I haven’t backtested these automatically, nor prepared the semi-auto bot to handle these criteria yet, but I can do this manually at the moment.

Which prop firm?

The next question is, when I have set up the tech side correctly, which prop firm should I go with? FTMO still a solid choice, but MFF has come onto a lot of people’s radars and offers a slightly easier 8% monthly target, 12% max drawdown vs FTMO’s 1010 version. Eventually I’d probably look to do both and spread the risk via a trade copier, as I’ve tried to do before with 100k accounts at FTMO and Enfoid.

Then it’s a question of size. This time I think I’ll take the pressure off and chose a $50k account. With FTMO this costs £289, but you get a £35k account. With MFF it’s £238 and you get a £40k account. So profit share is higher in effect via MFF. For less outlay, with easier targets. That’s a competitive offer.

So my expectations now are hopefully more reasonable than the first few attempts I’ve had. Lower outcomes, lower outlay, easier targets. That should have a material effect on how I progress psychologically.

Strategy

Then it’s a question of being certain of my strategy’s results. I’m looking to approach it like a small portfolio of strategies, with a breakout entry, reversal and trend following all built in to the same automated data collection, that spans 14 pairs per pair traded.

To be more certain, I’d do well to backtest the various entries on the target pairs (majors, mainly, for less erratic movements). I can do this automatically, with a time of day filter, and visually check if I’d have entered at the same times, exited as per the bot etc. and be able to tell if semi-manual will work for me. You have to bear in mind at this stage that in reality I won’t be holding onto winners for 14 hours, nor will I be trading through news etc. so the bot results will be taken with a large pinch of salt.

I should really do a trial under prop conditions to be sure I’m on the right track, although I feel I need the reality and pressure of the challenge for any test to be worth doing.

It might also be nice to trial just a single pair/asset for one day, or do my usual and seek out the widest strength divergences or tightest ranges to trade.

Final note on strategy: I’ll avoid trying to hedge out losing positions, as I don’t feel it’s a healthy mindset vs taking small losses and then trying again.

Daily schedule

This one is tough. Many breakouts occur at the start of the London session. In my house, if you wake up at 6am and creep downstairs, children follow you. They need things.

The partial solution for this is a laptop beside the bed, which I’ve done before, but it’s really not ideal for getting your head in the game. Still, this is where I’m hoping the intra-day trend following can pick up the slack if the initial breakout is missed.

I also tend to finish no later than 5pm, midway through the US session, where sometimes large moves can also take place.

A solution to both of these is also in the use of limit orders, but that doesn’t usually square with my “wait for confirmation” phase of the strategy. I’ll consider this after reviewing the backtests.

The final risk and weakness to my schedule for trading prop is freelance work. It sometimes comes up on short deadlines that require me to put in 8 hours a day straight. The money is good, but it means I’m not mentally available to review charts or follow movements all day.

In this case I’m hoping the early morning breakouts can be entered on, and left to run for the rest of the day with minimal monitoring required.

Automated, semi-auto or manual/discretionary

In all of these choices, discretionary exits are an option, but automated exits are for me the major benefit of automation.

Automation solves my weak areas in some split-second decision making, but also in the administrative and risk-management decisions on sizing, number of entries, scaling in/out and so on. Once my criteria have been hit, getting an alert and dialogue box to enter is the best way for me to trade hands-off. Especially on bigger moves where I have a few minutes to check what’s going on.

One issue with the dialogue boxes is when I type a lot (which I do for my job) it’s very easy to accidentally hit YES to a trade by hitting the space bar or enter/return. Which is not ideal! I might build in a secure key combo that needs pressing to initiate the suggested trade, we’ll see if that’s possible. Or perhaps a double dialogue box, something of this kind. I’m not a double-spacer so that should be workable.

So with another few day’s of work on backtesting and decision-making I should be ready to take the plunge. It looks like markets could be lively in the next few months, so it’s as good a time as ever to take my next challenge.

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