How To Make +$10,000 with Prop Firms & Hedging Strategy [FTMO]

Understanding EXO Capital's Edging Strategy

Introduction to Prop Firm Challenges

• Passing prop firm challenges can be difficult, often leading to repeated failures for amateurs seeking funding.

• EXO Capital is introduced as a solution that assists traders in passing these assessments and offers strategies to recover challenge fees if they fail.

Overview of EXO Capital

• The edging strategy ensures that traders do not lose their money while attempting to get funded by prop firms.

• The focus will be on FTMO's edging plan, with an example using a $200,000 account size and a $1,200 challenge cost.

Breakdown of the Challenge Phases

Step One: Initial Costs and Outcomes

• The total initial cost for step one is $2,800 ($1,200 challenge cost + $1,600 edging cost).

• Two possible outcomes exist after this phase: passing the challenge or failing it. Passing means hitting a 10% target ($20,000).

Scenario Analysis: Passing vs. Failing Step One

• If passed, the prop account balance increases to $220,000; if failed (maximum loss of 10%), it drops to $180,000.

• Profits from the broker side can cover the next challenge fee if failed; net profit would be around $1,200.

Progressing Through Step Two

Costs and Profit Targets

• Assuming a pass leads into step two with an initial edging cost of $200 and a reduced profit target of 5% ($10,000).

• Again two outcomes are possible: passing results in a funded account at $210,000; failing returns the balance back to $180,000.

Financial Implications of Failure in Step Two

• If failed again with losses capped at 10%, profits from the broker side yield only minimal net gains after covering costs.

Final Steps Towards Funding

Achieving Funded Status

• Upon successfully passing step two, traders become funded account owners without excessive hurdles.

Next Steps After Funding

• With an initial edge cost now reduced to $100 and profit targets adjusted downwards for subsequent rounds.

Payout Scenarios

Understanding the Prop Trading Process

Overview of Payout and Funding Rounds

• The trader is qualified for a payout and another round of funding, but if they fail, their account balance reduces to $180,000 with a maximum loss set at 10%. The broker profits $5,300 plus the original $100.

• If there’s a loss instead of a win, the process must restart from step one. Profits are only added to the broker's account when the prop account incurs losses.

Progressing Through Funding Steps

• Upon winning in step three, traders move to funded account round two (step four), which has an edging cost of $3,300. They can use previous profits plus an additional $200 to finance this step.

• In case of success in step four, the prop account balance reaches $210,000 after hitting a target gain of $10,000. The expected payout increases to $8,000 due to an 80/20 profit split agreement.

Scenarios After Step Four

• If traders stop at this point after deducting costs from their earnings, they would net around $1,200.

• Conversely, if they fail in this round and return to step one with a prop account balance reduced to $180,000 and broker gains remaining at $5,300.

Continuing Through Further Steps

• Moving into funded account round three (step five), similar processes apply with slight differences. This round also requires an edging cost of $3,300 while targeting another 5% gain ($10,000).

• Success leads again to a prop account balance of $210,000 and an expected payout of $8,000; however net profits increase significantly due to using prior profits for financing.

Final Round Insights

• In case of failure during this stage (step six), both scenarios yield over $10,000 net profit despite setbacks.

• The final edging cost is set at $4,600 with a new target set at 7%, equating to a potential gain of $14,000 on successful completion.

Conclusion on Trading Strategy

• Regardless of winning or losing outcomes through all steps taken in this trading strategy results in significant net profits that allow for continued attempts without substantial losses incurred from challenge fees.

Understanding Prop Trading Strategies

The Relationship Between Prop Firms and Real Accounts

• When a prop firm takes a buy position, the corresponding real account will sell, and vice versa. This dynamic allows for scaling lot sizes since the real account does not need to match the size of the prop firm account.

• If you fail your challenge with a prop firm, you lose your challenge fee; however, your real account can still generate profits that recover this amount. This creates an opportunity to withdraw funds and attempt the challenge again.

Importance of Having a Trading Strategy

• A trading strategy is essential because profits are not typically made during challenge phases. Trading with an edge can lead to faster and more significant gains.

• Engaging in simultaneous trades on two different prop accounts (buying on one while selling on another) is against prop firm rules. It poses risks such as hitting maximum daily losses on both accounts simultaneously.

Psychological Benefits of Trading with an Edge

• Utilizing a trading strategy provides financial security and peace of mind. If you pass your challenge, everything is favorable; if you fail, you can recover losses through your real account.