**I Made $1,300,000 From Prop Firms - Here's What They're Hiding From You — Transcript & Summary | SozAI** Source: https://sozai.app/transcript/made-1300000-from-prop-firms-hidden/ JJ Simon reveals how prop firms profit from traders' failures and shares strategies to succeed in evaluations and funded accounts. ## Key Takeaways - Prop firms profit primarily from traders losing, so understanding their business model is crucial. - Trading strategies must be tailored specifically for prop firms, not just copied from live trading. - Risk levels on evaluations should be higher than most traders assume to pass faster and reach funded accounts. - The expected value of accounts is not straightforward and must be considered when planning trades. - Awareness of hidden rules and payout structures can significantly improve a trader’s success rate. ## What the video covers - Prop firms make money when traders fail, not when they trade well, due to their payout and risk structures. - Most traders try to beat the market on prop firms, but the real goal should be to beat the prop firm itself. - Evaluations and funded accounts are typically simulated, meaning traders are not risking the firm's real money initially. - Prop firms design rules and payout structures to favor the firm, encouraging conservative trading and frequent trader failures. - The expected value of a prop firm account is different from its nominal value and can be calculated using recursive methods. - Traders should use prop firm-specific strategies rather than live account strategies due to differences in drawdown and payout rules. - Risk management should differ between evaluation and funded accounts to optimize passing and payouts. - Understanding the prop firm's business model helps traders avoid common pitfalls and increase their chances of receiving payouts. - Prop firms have hidden rules and consistency requirements that traders must navigate to succeed. - JJ Simon shares personal experiences of both successes and failures to illustrate how to adapt trading approaches for prop firms. ## Chapters 1. 00:00 Introduction: How Prop Firms Make Money 2. 01:01 Simulated Accounts and Their Impact 3. 02:08 Why Prop Firms Want You to Fail 4. 03:14 Understanding the Real Expected Value of Accounts 5. 05:58 Adjusting Risk for Evals vs Funded Accounts 6. 07:15 Maximizing Payouts and Minimizing Expenses 7. 11:03 Examples and Practical Applications 8. 14:36 Hidden Rules and Consistency Requirements 9. 15:36 Summary and Final Advice Answers ## Questions about this video Why do prop firms want traders to fail? Prop firms make money primarily from traders who lose money. Their business model relies on more losing traders than winning ones, which is why they set rules and payout structures that encourage failure. Are prop firm funded accounts real money accounts? Most prop firm funded accounts and evaluations are simulated, meaning the trader is not initially risking the firm's real money. This affects how traders should approach risk and strategy. How should I adjust my trading strategy for prop firms? You should use prop firm-specific strategies that account for their unique drawdown limits and payout rules, rather than applying live trading strategies directly. ## Full Transcript — Download SRT & Markdown 00:00 Speaker A Prop firms don't make money when you trade well. They make money when you fail. Once you understand how the business actually works, you're never going to take an evaluation or a funded account the same again. My past challenges at pretty much every prop firm that exists. I've taken payouts, but I've also blown accounts that I never should have blown just because my approach to trading prop firms in general was very, very wrong at the start. Most traders are trying to beat the market on a prop firm, whereas you should actually be trying to beat the prop firm just because of how the payout structure is structured on a prop firm. 00:09 Speaker A firm that exists. I've taken payouts, but I've also blown accounts that I never should have blown just because my approach to trading prop firms in general was very, very wrong at the start. Most traders are trying to beat 00:17 Speaker A It's very, very different than it is on a live account. So, it's a bunch of strategies that work on live that don't work on prop firms because of how the drawdown works. Likewise, a bunch of strategies work on prop firms but not on live because of how the drawdown and the payout rules work. So, make sure you're trading a prop firm specific strategy. And that's what I'm going to get into in this video, how you can build one of those yourself just by understanding how prop firms actually work. So, by the end, hopefully you understand their business model well enough that you stop blowing all these challenges and you're actually getting payouts that are larger in size than your evaluation spend. All right, I have seven things I'm going to go over. Each one builds on the previous one. So don't skip ahead or else the last ones are not going to make sense. So let's start with the first one. All of your accounts 00:24 Speaker A It's very, very different than it is on a live account. So, it's a bunch of strategies that work on live that don't work on prop firms because of how the draw down works. Likewise, a bunch of strategies work on prop firms but not on 00:34 Speaker A are simulated. And if all of your accounts are simulated, this means your evaluations and your funded accounts. 00:42 Speaker A understanding how prop firms actually work. So, by the end, hopefully you understand their business model well enough that you stop blowing all these challenges and you're actually getting payouts that are larger in size than your valuation spend. All right, I have 00:52 Speaker A The live accounts are actually live, but let's not talk about those yet. I'll get into that in a minute. So if you are trading on simulated accounts for eval, you're never actually risking real money of the prop firms. They don't want you 01:01 Speaker A are simulated. And if all of your accounts are simulated, this means your evaluations and your funded accounts. 01:06 Speaker A to know this. They want you to trade extremely conservatively on the eval on the funded account. Because if you're treating the evaluation and its $2,000 drawdown as actually $2,000 of real drawdown, then you're going to be risking 01:17 Speaker A to know this. They want you to trade extremely conservatively on the eval on the funded account. Because if you're treating the evaluation and it's $2,000 draw down as actually 2,000 of real draw down, then you're going to be risking 01:28 Speaker A way less than you actually should. You're going to be risking $50, $100 at a time, maybe even $10. But that's definitely something you should not do. 01:34 Speaker A I up my risk on the eval just so I'm able to pass them quickly and then get to the funded account stage. Obviously, if it's your first time on an eBay and you're new to trading, you should take 01:41 Speaker A I up my risk on the eval just so I'm able to pass them quickly and then get to the funded account stage. Obviously, if it's your first time on an eval and you're new to trading, you should take 01:54 Speaker A challenges, they are making money. You need to think of how the prop firm makes money. Money goes into the prop firm, money goes out from the prop firm to winning traders. Okay? So in the proper business model, if they want to make 02:08 Speaker A it a lot slower than I do. But in general, your evals are simulated and your funded accounts are simulated, which leads very strongly to the next point over here, which is that they want you to fail. So, if you are failing 02:18 Speaker A fail. They're not copy trading you. That's literally illegal for them to copy trade more than one person at a time. Because if anytime they trade in opposite directions, that's called hedging. And if you hedge yourself, the CME literally makes that illegal. So 02:30 Speaker A challenges, they are making money. You need to think of how the prop firm makes money. Money goes into the prop firm, money goes out from the prop firm to winning traders. Okay? So in the proper business model, if they want to make 02:39 Speaker A Obviously, that's why they structure all of these rules. Some have hidden rules as well. I'll get into those in a bit. 02:43 Speaker A more money, they have to make more money from losers and they have to pay less to winners. That's obviously why they structured the rules, why they add payout gaps, live accounts, all that sort of stuff. But they want you to 02:53 Speaker A determine how can I move from this side over to this side. Now, let's move on to number three. The real expected value of an account. Prop firms definitely don't want you to know this and I'm about to spill some secret sauce here. But let's 03:04 Speaker A fail. They're not copy trading you. That's literally illegal for them to copy trade more than one person at a time. Because if anytime they trade in opposite directions, that's called hedging. And if you hedge yourself, the CME literally makes that illegal. So 03:14 Speaker A course, if you pay 100 bucks, it's worth about $100. Funded account, though, that's a totally different story. I'll give you two examples. The first one, let's say you have a 33% pass rate and the eval costs $100. This means you're 03:24 Speaker A they're not copy trading their winners. They're not booking your trades. They might be selling your data. I'm not sure about that. But the main way that they make money is from losing traders. 03:29 Speaker A Now, if you're on that funded account, you're given $2,000 of max loss. You don't have a set profit target. You just have to make some money and then you can take a payout once you meet the payout rules. So, from this $2,000, your real 03:41 Speaker A Obviously, that's why they structure all of these rules. Some have hidden rules as well. I'll get into those in a bit. 03:52 Speaker A now your expected value of this account, which just doubled in size, is not $600 anymore. it's now $2,000. The reason for that is is you can solve using recursion for the value of an account. I won't get too far into the math here, but if 04:06 Speaker A But that's why they structure all of the rules just so that you are expected to make less money than you should. So, if you're aware of these rules and you're aware of the proper structure, how they make money, how they lose money, you can 04:16 Speaker A blow the account, you psychology problems. That is not including in that. I'm not accounting for that here, but this is just an average. On average, assuming you keep doing this, you have about $2,000 expected value. And if you're a break even trader, like you 04:29 Speaker A determine how can I move from this side over to this side. Now, let's move on to number three. The real expected value of an account. Prop firms definitely don't want you to know this and I'm about to spill some secret sauce here. But let's 04:41 Speaker A account is. When it's a new account, it's worth 300. When it's in profit, it is worth $2,000 even though it's only up $2,000. So that is going to lead to future points as well which is you should trade a different risk-to-reward 04:55 Speaker A talk about the expected value of your prop firm account because it's not $2,000. It's not $50,000. So, I'll skip the evaluation for now. Your expected value of an evaluation is pretty much how much you're paying. Of 05:06 Speaker A different risk. Second eval third funded. The reason for that is all firms have different rules for the most part. They have pretty similar structures, but they all have different rules. Some have the consistency rule. Some have minimum winning days rule. Some have minimum 05:23 Speaker A course, if you pay 100 bucks, it's worth about $100. Funded account, though, that's a totally different story. I'll give you two examples. The first one, let's say you have a 33% pass rate and the eval costs $100. This means you're 05:36 Speaker A way that can be optimal just from just from the start. I hope that makes sense because our goal on prop firms is to maximize the payouts while minimizing the expenses. So, if you take a different risk-to-reward on each firm 05:47 Speaker A passing one out of three and your average cost to achieve the funded account is $300. 05:58 Speaker A in a minute, but you should be trading a different risk on each firm on your evals and on your funded accounts. These should not be the same because first of all, they're worth more, some are worth less. Second, on the EVAL, all you have 06:10 Speaker A Now, if you're on that funded account, you're given $2,000 of max loss. You don't have a set profit target. You just have to make some money and then you can take a payout once you meet the payout rules. So, from this $2,000, your real 06:19 Speaker A account. You do have a different target. Now, your target is to get as much as you possibly can in the form of payouts before hitting your minus 2,000. So, eval very very different things. Some evals have consistency, funded has no 06:33 Speaker A expected value of this account is $300 because you paid $300 for it. Now, I know it could turn into something else, but let's just say for sake of discussion, it's $3,000. If you somehow grow your account to $2,000 in profit, 06:44 Speaker A optimizing this because you have to optimize for different things. Eval just optimize your pass rate. Funded you optimize your chance of a payout multiplied by size of the payout, which is basically like your expected value of that. Last thing I'll just mention again 06:56 Speaker A now your expected value of this account, which just doubled in size, is not $600 anymore. It's now $2,000. The reason for that is you can solve using recursion for the value of an account. I won't get too far into the math here, but if 07:07 Speaker A hidden rules. Just in general, prop firms do like to have hidden rules in the help center. There's nothing you can do about it except read the help center. 07:15 Speaker A you're able to take a payout every five winning days and you are a breakeven trader, then on average in the long run, you take out half of it, you take out another half of it. Obviously, if you 07:24 Speaker A So, definitely just go find them in the help center. Make sure you're not missing anything like is there consistency rules, there winning days rule, pretty much everything that you can think of for what a proper might add. Just go check the help center, 07:35 Speaker A blow the account, you have psychology problems. That is not included in that. I'm not accounting for that here, but this is just an average. On average, assuming you keep doing this, you have about $2,000 expected value. And if you're a breakeven trader, like you 07:46 Speaker A let's talk about real risk for a second. I'm going to reference this that I just drew back here for this point here. The real expected value of your account. So remember we paid $300 because we did three attempts of $100 to pass the eval. 07:59 Speaker A have a 50% chance of winning $250 at this point and a 50% chance of losing $250. The expected value of this is zero added. So, it is just $250. So, that is what the real expected value of an 08:12 Speaker A trade, two trades, however many trades, doesn't matter. Both of them have $2,000 of max loss. Now, but the expected value of these accounts is very, very different as I explained previously. And the real risk is way less than you 08:23 Speaker A account is. When it's a new account, it's worth $300. When it's in profit, it is worth $2,000 even though it's only up $2,000. So that is going to lead to future points as well which is you should trade a different risk-to-reward 08:29 Speaker A Might seem like a lot. Wow, $1,000. I was just doing the eval for 100 bucks. 08:33 Speaker A on each prop account. Now, what I mean by this are there are three different things that you need to know about trading different risk on different accounts. Okay. So first one is on different firms you'll trade at 08:48 Speaker A We're risking half of that. So you're risking half of $300, which is $150. So basically, your real risk on this new funded account, if you're risking $1,000 of the simulated money, your real risk is $150 because that is half of what you 09:03 Speaker A different risk. Second, eval. Third, funded. The reason for that is all firms have different rules for the most part. They have pretty similar structures, but they all have different rules. Some have the consistency rule. Some have minimum winning days rule. Some have minimum 09:13 Speaker A that same exact $1,000, no matter what my profit target is, my actual risk is $1,000 because in the long run, my expected value of this is $1,000 worth of payouts that I could be getting. Of course, that is all assuming you're a 09:25 Speaker A trading days rule, different size winning days, different size consistency rules, all that sort of stuff. Different payout caps. I want, I'll just stop there. They have so many different rules. So, if you're trading the same strategy on different firms, there's no 09:37 Speaker A you're risking a,000 real dollars. If you have a new account and you're risking a,000, you're only risking 150. 09:42 Speaker A way that can be optimal just from the start. I hope that makes sense because our goal on prop firms is to maximize the payouts while minimizing the expenses. So, if you take a different risk-to-reward on each firm 09:53 Speaker A accounts are bad. By live accounts are bad, I mean two things. The first one, proper live accounts are bad. The second one, real live accounts are bad. Now, I'll just do this one because it's pretty simple and it's pretty quick. If 10:07 Speaker A and on each account, like if it's an eval, it's a funded, if you're funded in profit, step six will tell you about risk management on funded accounts. It pretty much relates to all of this really I just explained. I'll get there 10:21 Speaker A you're taking out 130k, then it's a it's definitely worth it. At least in my opinion, this is sort of what what mine looks like per month. I feel very comfortable spending this amount of money knowing that I'm trading on so 10:30 Speaker A in a minute, but you should be trading a different risk on each firm on your evals and on your funded accounts. These should not be the same because first of all, they're worth more, some are worth less. Second, on the eval, all you have 10:41 Speaker A have 30K to make 130K? So, now I'm up 100K or on a live account, a 2% monthly target will give me 24% per year. 10:50 Speaker A to do is make $3,000 before minus $2,000. And this is a trailing drawdown. There's some other rules and stuff in there, but you have a target on the eval. Your target is to make $3,000 on your fund. 11:03 Speaker A is basically you just need $5 million to make 100k per month with this exact return 2% per month because 2% of this is this would I rather have 500 million of my own money or would I rather have 11:18 Speaker A 30k of my own money to make the exact same return? Well, obviously this one because you can do this multiple times with multiple 30ks every single month. 11:25 Speaker A So, that in general is why I don't trade a real live account. Uh, this is going to be my target when I do trade live. 11:31 Speaker A So, as soon as I have more than 5 million, I'm going to live to trade this. I see all these traders, they go live with like a 50k account that like it just makes absolutely no sense. Um, first of all, the risk of ruin on that 11:41 Speaker A account is extremely high if their risk is high. And second of all, you put 50k in profit, you get 150k back. So, I don't think they're going to be tripling their live account because if that sort of strategy existed and it was that 11:51 Speaker A extremely profitable, then uh they should sell that to an institution for a billion dollars right now. Now, why are proper live accounts bad? Main reason is that they just take away money that you have in your SIM accounts. I'll just 12:01 Speaker A give you an example. If I had five SIM accounts of 10K each, then obviously I have 50K in capital in my funded accounts. And as I said earlier, the expected value of your accounts is actually 50K because in the long term, 12:14 Speaker A you get 50K payouts from these accounts. assuming no tilt. Now, let's go over three examples for what different props would do with this money as you go live. 12:23 Speaker A So, definitely check out the help center. If your balances are growing above 10K total, just go look at the help center. It'll save you so much money just to understand how live programs work. You don't need to worry 12:31 Speaker A about it yet. But anyways, Topstep first because it's probably the biggest firm out there. If saw $50,000 in your SIM accounts and you went live, you would get a $10,000 live account. Where did the other 40k go? Well, you have to 12:44 Speaker A unlock it. You have to unlock it through making bonuses. Every time you make 9K, then you get a bonus of 10K added to your account, which seems okay, great. 12:54 Speaker A If I double my account, then it triples. Basically, that you have an extra 10K. 12:59 Speaker A Yes, that's true. But you have to keep doing this. You have to do this four times in order to unlock the 40K that you had. So, automatically, your expected value of your account diminishes greatly, probably at least 50%. So you have to make 36K, right? 13:15 Speaker A Because 9\* 4. You have to make 36K in order to get your 40K that was in reserve. Obviously, these are extremely large numbers and usually only like achievable 150k counts. But same approach applies to 50Ks. Even if you 13:26 Speaker A have like 10K in your balance, you go live, you wouldn't have the bonus, but that sort of approach is what I'm what I'm mentioning here because you're probably not going to go live unless you don't have like 25 maybe 30K in your 13:37 Speaker A account. So you don't have to worry about that and you're getting lots of payout. So it is bad. First of all, for the reason that they will delete most of your profit and second of all, it is only real risk. If you have 10K in your 13:46 Speaker A live account on Topstep, then your real risk is 10K. If you get these new funded accounts, your real risk is only like 300 bucks for these funded accounts. So, I would much rather be risking 300 for $2,000 of draw down than risking 2,000 13:58 Speaker A for $2,000 draw down just statistically. And I hope that makes sense. Now, other firms have live account programs. 14:05 Speaker A They're not as bad as TopSep. I think Topsip is one of the worst live account programs in general now that they've kind of done this bonus unlock program where they just delete 80% of your profit and you earn it back. Doesn't 14:16 Speaker A really make sense, but uh let me go over Lucid and Tradeify. These are not bad. 14:21 Speaker A They're actually good as long as you know what they do. You have to read the rules. What they'll do is they'll give you a $0 live account. You get one $0 live account per funded account that has taken a payout on both of these firms. 14:33 Speaker A Obviously, the rules might change since you're watching this video, but like I keep saying, go check the help center. 14:37 Speaker A It's going to save you thousands of dollars and it'll take you like 15 minutes. Need to know all the rules and you need to know the rules about when you get moved live and what the live account looks like. So, they'll give you 14:46 Speaker A five accounts with $0. For 150k accounts, you have a $4,500 max loss. And if you make $4,500, then you get a bonus of $4,500 added to your account. 14:55 Speaker A So, this is great. This is like way more profitable than your funded account. So, I would love to be in these live programs forever and have infinite accounts to trade. Um, but they do cap it at five, which is fine. And the 15:06 Speaker A reason why it's bad, not really bad, as long as you know what's happening is if you had the same 50k, if you had 50k in funded accounts with either of these, they're just going to delete all of it. 15:15 Speaker A But that's totally fine, right? You're going back to zero. You have a chance to earn your bonus. The value of these accounts is probably decently high, right? But still, you made 50k and it's gone. But just understand, okay, I don't 15:25 Speaker A want to grow these accounts too large because I know once I hit the live account that it's going back to zero. So keep it in the back of your mind. and also leads to why you should trade different risk on each firm just that 15:36 Speaker A sort of approach in general. So that was a lot about what propers don't want you to know pretty much just like what is the basis for my entire approach using real risk real expected value why proper want you to fail how you can become this 15:49 Speaker A side of the proper equation so someone that they're paying out so someone that they are getting money from and lastly I just want to show you a website of mine all right I'm going to put this in the 15:58 Speaker A description but basically what you do is you input your trade history and it's going to tell you the statistically optimal platform to trade on so instantly you can make like another $100 just by using it once. So, what I'll do 16:08 Speaker A is I'll just type in how many trades I took, how many wins I took, average win, average loss. There you go. You can back test that. You probably need like at least 50 trades for it to be statistically significant. Just press 16:18 Speaker A that. And then it might ask for your email. I'm not going to send you any spam emails, but it tells me, okay, my best is this account. And what it shows down here is the account size, the pass 16:28 Speaker A rate expected, the cost of the eval, the cost to get the funded account, which is that formula I mentioned previously. 16:34 Speaker A basically eval cost divided by pass rate plus activation fee if there is one and the expected payout. So based on these statistics that I just entered, if I buy the Apex end of day 150k account, I'm making $244 per eval. Now let me scroll 16:47 Speaker A down here. The same exact strategy. If I buy the Lucid Direct or the Trade by Lightning, I'm losing $166. I'm losing 192. So you can sort of see how even I'm I'm even losing money on top. I'm losing 16:58 Speaker A money on some MFF accounts, right? So why would you buy those when you have the same strategy which can literally make you like $300 more dollars? Like you have to buy the optimal account. You have to trade with the optimal firm 17:09 Speaker A based on your strategy. Also three final things that you can sort of notice from the website. It is very new. So just take it with a grain of salt that I want to show you. Okay. So notice on both of 17:19 Speaker A these accounts, they are instant funded accounts. It's performing really bad. So maybe my risk or my strategy, my win rate is not good for funded accounts. 17:28 Speaker A It's pretty good for evals because it's a cheap cost of funded on these two sites, but maybe it's not that good for funded accounts. So, what if I trade this strategy on evals and I trade something else on funded accounts, 17:40 Speaker A right? I trade the same strategy across all the firms, but I do a different risk-to-reward. Obviously, it's my main reversion strategy. You can check it out in my other videos, but I trade a different risk-to-reward on every single 17:51 Speaker A firm obviously because this risk-to-reward is really good for this firm, but it's really bad for this one and this one and this one, right? So you're literally losing money whenever you buy an EBO and these you're winning money. So don't like over exaggerate 18:02 Speaker A your win rate. Like if you say your win rate is like extremely high for your riskreward and your profit factor is extremely high, then I would say just please double check. It might not be true and it's going to give you like 95% 18:11 Speaker A pass rates and that's just obviously not true. Obviously all this doesn't take into account tilting. And I do have a Monte Carlo simulation so you can kind of see the the actual paths that it's taking to max loss. It also shows you 18:23 Speaker A how long it's going to take. So like one EV out here took 345 days obviously because my risk management I'm only going for 760 per trade. So maybe that's not the best for 150k account because obviously I need to reach $9,000 before 18:35 Speaker A minus $4,000. Uh obviously the draw down trails which is why it dies right here. 18:39 Speaker A So that is included as well of course. And last thing I'll mention just in case it helps you, you can sort of see what a bad stretch looks like. So with the strategy, eight losses in a row at 500 18:48 Speaker A loes a $4,000 account. you can sort of see what is the probability of having this many losses in a 100 trade run. So the website's entirely free. It's in the description. It might cost money at some time, but I just want you guys to 19:00 Speaker A automatically be trading on the most awful platform firm making more money. So go check it out and join my Discord as well. Let me know if there's any errors with the website because I am trying to make it perfect. But thank you 19:10 Speaker A for watching. Hopefully all that made sense and hopefully you are now on the winning side of the proper equation. Topics: prop firms prop trading funded accounts trading strategies risk management evaluation challenges trading psychology expected value JJ Simon trader success --- This is the markdown twin of https://sozai.app/transcript/made-1300000-from-prop-firms-hidden/ — the same content, without the markup. Published by SozAI (https://sozai.app). Reuse and quotation are allowed with attribution and a link back. Machine-readable index: https://sozai.app/llms.txt · data API: https://sozai.app/api/