What are 🔑 Price Locks & Which Prop Firm is Teasing Acquisition?

Hey Prop Traders, here’s what is buzzing in the prop trading June 20, 2024

🗞️ TODAY’S PROP TRADING INDUSTRY NEWS

1. Purple Trading’s Prop Brand Makes Expansion

2. Funding Pips Teases Acquisition

3. GFT CEO Tech Firm Promotes 30 Day Prop Firm Launch

4. Alpha Capital Rolls Out DX trade

✂️ LATEST PROP FIRM DISCOUNT PROMOTIONS

• Axi Select First FREE Funded Trader Program

• APEX Trader Funding Save 80% Off Evals

• Blue Guardian 40% Off Everything

• The5ers 5% Exclusive Discount

• Oanda Prop Trader Exclusive 25% Discount

• MyFundedFutures 20% OFF ALL Evals

• MyFundedFX 10% OFF ALL Plans

🎓 PROP TRADING LINGO

What’s a CME Price Lock Limits? 🚦

Think of CME price lock limits as guardrails on a wild trading road. These limits keep the price of a futures contract from moving too wildly in one trading day. They’re there to keep things from getting too chaotic. If the market hits these guardrails, trading might pause, the limits might get adjusted, or trading could stop for the rest of the day—depending on what’s being traded and the rules in place.

Key Points about CME Price Limits 📝

What They Are: Price limits are like the maximum speed limit on a road for a futures contract. It’s the furthest the price can go up or down in a day.

What Happens When They’re Hit: When the price hits these limits, it’s like hitting a stop sign. The market might take a break, stay at that limit, or stop trading altogether for the day.

How They’re Set: These limits are based on the end-of-day price from the previous session. They can vary depending on what you’re trading, the contract month, and the time of day (daytime limits are different from nighttime ones).

Keeping Updated: These limits get updated after each trading session. It’s a good idea to check the CME Price Limits page regularly to stay in the know.

Why Some Prop Firms Don’t Want You Trading Close to These Limits 🚫

Some prop firms have rules to keep you from trading too close to these limits—such as no trading within 2% of the price limit. Here’s why:

Managing Risk: Trading too close to the limit means there’s a higher chance of hitting it, which can cause the market to halt suddenly. This can lead to big, unexpected losses if the market moves against you when it starts up again.

Handling Volatility: The closer the price is to the limit, the more likely it is to swing wildly. Staying away from the edge helps avoid these unpredictable movements.

Firms Want Responsible Traders: Firms want traders who make smart, responsible decisions. Keeping a safe distance from price limits shows you’re careful and thoughtful about managing risk.

How to Stay Clear of That Danger Zone ⚠️

Watch the % Net Change: Keep an eye on the % Net Change for the contract on your trading platform.

Do Some Quick Math: If a contract has a 5% price limit and your firm says not to trade within 2% of that limit, then you should avoid trading if the price change is more than 3% up or down. Just subtract the 2% buffer from the 5% limit.

By understanding these concepts and following these tips, you can keep your trading smooth and avoid getting caught up in market turbulence. Happy trading! 🚀 ✅

🔥 TRADING TIPS

📌 PASS THE PROP TRADING TIP

Prop Trading Tip: Understanding Correlation

When you're aiming to pass a prop trading challenge, it's important to understand how correlations between different instruments and currency pairs can amplify your gains 📈 and losses 📉. Here’s a straightforward guide to help you navigate this:

Positive Correlation: This means two instruments move in the same direction. For example, EUR/USD and GBP/USD often rise or fall together 📊.

Negative Correlation: This means two instruments move in opposite directions. For example, when EUR/USD goes up, USD/JPY might go down 🔄.

Why It Matters

Bigger Gains: Trading positively correlated instruments can boost your profits if things go your way. If you’re long on both EUR/USD and GBP/USD when the dollar weakens, you could see double the gains 💰.

Bigger Losses: But if the market turns against you, those same trades can double your losses. If the dollar strengthens, both your EUR/USD and GBP/USD trades could suffer 📉.

Managing Correlations

To avoid amplified losses, mix up your trades. If you’re long on EUR/USD, avoid a long position in GBP/USD. Instead, consider something like USD/JPY or AUD/JPY, which might not move in the same way. Correlations can change with market conditions and events, so keep an eye on these changes and adjust your strategy as needed. For example, if you spot a good trade in EUR/USD, be cautious if GBP/USD is highly correlated, and look at pairs like USD/CAD or AUD/JPY for better diversification. Understanding and managing correlations helps you control risk and avoid doubling down on losses, improving your chances of passing your prop trading challenge. 🚀

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📈 TRADER PSYCHOLOGY

How to Tell if Someone is Lying About Their Trading

Here is one quick way to tell if someone is lying about their trading.

“I trade with a 1:1 risk-reward ratio and I win 80% of my trades.” 🎯

100% nonsense. ❌

For the sake of argument, let's assume that a trader makes 2 trades per day. (The average is somewhere between 10-20 per day, but let’s be conservative.) 🤔

We’ll trade at 10:1 leverage for a 15 pips target and a 15 pips stop twice per day. 📈

There are 250 trading days in a year. That means you will make 500 trades. At an 80% win rate and just $1 per pip, you make $45,000 by the end of the first year. 💰 Rinse and repeat. 🔄

By year two, I now have $280,000 in my account. By year three, the account is now worth $1,120,000. In three years, you have increased the account by 10X. 🚀

Now let’s understand why such claims are total nonsense. Every trading strategy has something called the winning edge. It’s easy to calculate. The winning edge is basically the percentage difference between your win rate and your break-even point. 📊

For example, if you trade with a 1:2 risk-reward ratio (risking 2 to make 1), your breakeven would be about 67%. If you won 70% of your trades, your winning edge would be 3%. 📉

Some points of reference: in blackjack, the casino edge is about 2%. In roulette, the edge is somewhere between 2-4%. Renaissance Technologies, the world’s most famous and longest-running quant fund, has a winning edge of about 2% on the millions of trades it takes. Virtu and Citadel -- the biggest HFT market makers in the world -- are similar. 🏦

So, when someone on a podcast tells you they win 80% of their 1:1 risk trades, that means they are claiming a 30% winning edge. (80% - 50% breakeven rate). 📉

They. Are. Lying. 🚫

The reason why this is so upsetting is that it does a terrible disservice to many new traders who are trying to succeed at this game. It’s a Bernie Madoff type of hustle precisely because it seems so reasonable and attainable. Remember, Madoff ran his Ponzi scheme by being modest. He didn’t claim multi-hundred percent returns. He simply claimed a steady 1% gain every single month. His hustle was so toxic because it was so believable. The same goes for every con artist on the web who claims they “rarely lose on their trades.” 🚨

Real trading is about losing all the time, every day. It’s about clawing out a 3% edge and trying to keep it for as long as you can. 💪

So don’t be fooled. Trading is a game of inches. So anchor your expectations properly, please. ⚖️

Also, the next time you see a trader on YouTube driving a Lambo, then for SURE he is lying. 🏎️💨

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SPONSORED BY AXI SELECT

TRADE PROP WITH REAL FUNDS, LIVE ACCOUNTS

✅ Designed to Help Prop Traders Succeed
✅ First 100% Free Funded Trader Program
✅ No Demo or Virtual Funds. Live Accounts, Real Funds
✅ No Registration or Monthly Fees
✅ Earn Up to 90% of Profits
✅ Trade up to USD $1 Million
✅ You Can Trade the $500 Broker Account Deposit & Withdraw
✅ Unrestrictive Trading Conditions, EAs & News Trading Welcome

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