Best Prop Firms With No Daily Drawdown

Prop firms with lenient daily drawdown limits

The5ers

The5ers

The5ers Review

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The5ers is a prop trading company. “Prop” is short for “proprietary”, and a prop shop is a trading firm that deploys its own capital toward traders’ pursuit of trading profits. The5ers was registered in Israel in 2016 and has several representative offices globally, the largest of which is located in the United Kingdom. It uses the MT5 trading platform, which allows for the trading of currencies, stocks, precious metals, and indexes. Registration is paid, and the price starts at $235 ($85 of which is for the education program). Platform fees are below the market average. Its distinguishing feature is that it provides funding to traders by making free deposits into their accounts ranging from $6,000 to $4 million. This money cannot be withdrawn, but it is possible to withdraw profits from their use in the proportion of 50/50 (that is, half of the profit goes to the company). The leverage is up to 1:30. The5ers describes itself not as a broker, but as a platform for active trading with funding opportunities.

• Daily Loss: No daily limit

• Max Total Loss: $360, $600, $1200 (depending on plan)

OneUp Trader Funding

OneUp Trader

OneUp Trader Review

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This proprietary trading firm with headquarters in Delaware is well-known in its segment of the global market due to its favorable trading conditions and lenient financial policy. Traders can get funding from $25,000 to $250,000. They do not need to pay initial fees, but there are monthly fees from $125 depending on the plan. The challenge has one step and no additional conditions, just the profit target. No withdrawal fees or additional charges. A trader takes 100% of his profit until he earns $10,000. After that, the profit share is 90%. Withdrawal is available from day 1 with just one limit: the minimum amount is $1,000. There is no overall drawdown limit, only daily and trailing drawdowns. Trading is available on 15 platforms. Other features that are worth mentioning include quality educational content, dynamic analytics displayed on the user account dashboard, a two-level strike price system, and a generous referral program.

• Daily Loss: No daily limit

• Max Total Loss: $1500 to $5500 (depending on plan)

LuxTradingFirm

Lux Trading Firm

Lux Trading Firm Review

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The British proprietary trader (prop trader) Lux Trading Firm cooperates with Barclays, the country’s largest financial conglomerate. Lux Trading Firm’s official partners are Credit Suisse and Goldman Sachs banks. The company’s liquidity provider is FX-EDGE Trading Venue. Lux Trading Firm offers 4 account types. The minimum enrollment fee is 299 GBP (after evaluation, enrollment fees are fully refunded). Clients can get $50,000-$1,000,000 under management and grow their balances up to $10 million using TradingView, or MetaTrader 5. However, Lux Trading Firm has some restrictions. For example, you cannot copy trades or use advisors developed by third parties (only advisors built by traders themselves are permitted).

• Daily Loss: No daily limit

• Max Tota

• l Loss: $1250 to $10000 (depending on plan)

Why do daily drawdowns matter?

Daily drawdowns play a crucial role in the risk management strategies of prop firms. While some firms enforce strict daily drawdown limits, others opt not to impose them. Understanding the rationale behind these policies helps traders navigate prop firm requirements more effectively.

Why prop firms use daily drawdowns

1. Risk management and capital preservation

   • Limiting daily exposure: Daily drawdowns protect prop firms by limiting the potential losses a trader can incur in a single trading day;

   • Avoiding catastrophic losses: By imposing daily limits, firms can prevent traders from wiping out their accounts in one bad day;

   • Encouraging Consistent Risk Management: Daily drawdowns encourage traders to stick to disciplined risk management practices.

Example:
Imagine a prop trading firm sets a daily drawdown limit of 2%. If one exceeds this limit with a 5% loss in a single day, they're forced to stop trading. This prevents them from digging deeper into losses and preserves capital, thereby protecting against huge account blowouts.

2. Encouraging trading discipline

   • Control over trading psychology: Daily limits prevent traders from engaging in revenge trading after incurring losses, reducing emotional decision-making;

   • Consistency in strategy: By following strict daily drawdown rules, traders are incentivized to develop consistent trading strategies that minimize drawdowns.

Example:
I generally stick to my prop firm's 2% daily drawdown limit. Even if I face a string of losing trades, I never go beyond this limit. As a result, I manage to avoid impulsive decisions driven by emotions like frustration or fear of missing out. This disciplined approach helps me stay focused on my trading strategy.

3. Evaluation and scaling criteria

   • Qualification standards: Prop firms often use daily drawdowns as a qualifying criterion to assess trader discipline and risk management skills;

   • Scaling up traders: Maintaining compliance with daily limits helps traders prove their consistency, leading to larger funding opportunities.

Example:
Let's consider Trader A, who consistently respects the prop firm's daily drawdown limit. By doing so, Trader A demonstrates their ability to manage risk effectively. This is important because it shows the prop firm that Trader A can trade profitably even during unpredictable market conditions, without exposing the firm to excessive losses. As a result, the prop firm may be more inclined to provide Trader A with additional trading capital.

Why prop firms use daily drawdowns

1. Flexibility for trading strategies

   • Swing and long-term trading: Without daily drawdowns, traders can hold positions overnight or for multiple days, benefiting swing and long-term strategies;

   • Adapting to market movements: Traders can adjust risk and capitalize on market opportunities without the fear of hitting daily limits.

Example:
A firm like The5ers doesn't impose daily drawdowns, allowing traders to adapt their strategies to market changes and take overnight positions.

2. Reduced psychological pressure

   • Lower anxiety levels: Without daily limits, traders can focus on longer-term goals instead of managing intraday losses.

   • Better decision-making: Reduced pressure results in more rational trading decisions and adherence to trading plans.

Example:
Traders at firms like OneUp Trader Funding have reported improved decision-making and emotional control due to the absence of daily drawdowns.

3. Fostering Trader Growth

   • Promoting risk-taking: Eliminating daily drawdowns allows traders to take calculated risks without immediate penalties;

   • Encouraging consistent profitability: Traders can focus on consistent profitability across longer periods rather than managing daily results.

Example:
LuxTradingFirm allows traders to grow their accounts by maintaining consistent overall profitability without worrying about daily losses.

Some prop trading firms choose not to use daily drawdown limits. This can make trading more risky. Let's say there's a firm where traders can trade without these limits. One trader, named Alex, joins. At first, Alex does well and makes money without worrying about daily drawdown limits. Feeling confident, Alex starts taking bigger risks, moving away from being careful. But without those daily limits, Alex's trading gets riskier.

As Alex keeps trading without those limits, he starts losing money. These losses add up fast, leading to a big drop in his account balance. Because there aren't any daily drawdown rules, Alex doesn't have any boundaries to stop him from taking too many risks. So, what seemed like success at first ends up as a failure.

In this scenario, the prop firm's choice not to have daily drawdown limits puts traders like Alex in danger. Without those limits, traders might start making risky trades without thinking. This can lead to big losses.

Why prop firms and traders need daily drawdowns

Daily drawdown limits are important for prop firms and traders because they help manage risks both in the short term and for the long haul.

Short-term protection:

In the short term, these limits act like a safety net. They stop traders from experiencing big losses in just one day of trading. By having these limits, prop firms and traders can control the impact of sudden market changes or impulsive decisions. This stops them from losing a lot of capital all at once, which could be really bad for a trader's account or for the firm's finances.

How to avoid large drawdowns: 7 tips for prop traders

Avoiding large drawdowns is essential for maintaining capital, passing evaluations, and ensuring consistent profitability as a prop trader. Here are seven tips to help you manage and reduce drawdowns effectively:

1. Implement strict risk management rules

Limit your risk per trade to 1-2% of your total capital to ensure no single trade can significantly impact your account. Also you can set a personal daily loss limit (e.g., 3% of account value) to prevent emotional trading after a bad day. Calculate position sizes based on risk tolerance and stop-loss levels.

2. Diversify your trading strategies

Use a combination of strategies (intraday, swing, etc.) to balance overall risk. Trade different asset classes or currency pairs to spread exposure.

Risky trading techniques

Some traders might try risky tactics to stick to daily drawdown limits and avoid losses, but these methods usually don't work out well. Two of these risky strategies are the martingale strategy and averaging down.

• The martingale strategy is when traders double their bets after losing, hoping that eventually they'll win and make up for all the losses. But this can be really bad for a trading account. If there are lots of losses in a row, the bets get bigger and bigger, which can't keep going forever and ends up causing big losses;

• Averaging down is another risky move. It's when traders keep adding to losing trades, hoping they'll eventually make up for it. But usually, this just leads to even more losses.

These strategies might seem like they help avoid hitting daily drawdown limits, but they don't fix the real problem, which is bad risk management.

Final thoughts

Strict daily drawdown limits can stifle trader creativity and put undue psychological pressure on decision-making. Some prop firms stand out by offering flexibility with no daily drawdown limits. Instead, they focus on maximum total loss, providing traders with strategic freedom and a more relaxed trading environment.

Key Takeaways:

• Without daily drawdown constraints, traders can focus on longer-term profitability, aligning their strategies with market conditions rather than strict limits;

• By removing daily drawdowns, firms encourage more disciplined trading decisions, fostering trading discipline and avoiding impulsive trades;

• Maintaining overall drawdowns within set limits opens doors to higher funding tiers.

Methodology

Traders Union applies a rigorous methodology to evaluate prop companies using over 100 both quantitative and qualitative criteria. Multiple parameters are given individual scores that feed into an overall rating.

Key aspects of the assessment include:

• Trader Testimonials and Reviews. Collecting and analyzing feedback from existing and past traders to understand their experiences with the firm.

• Trading instruments. Companies are evaluated on the breadth and depth of assets/markets available to trade.

• Challenges and Evaluation Process. Analyzing the firm's challenge system, account types, evaluation criteria, and the process for granting funding.

• Profit Split. Reviewing the profit split structure and terms, scaling plans, and how the firm handles profit distributions.

• Trading Conditions. Examining the leverage, execution speeds, commissions, and other trading costs associated with the firm.

• Platform and Technology. Assessing the firm's proprietary trading platform or third-party platforms it supports, including ease of use, functionality, and stability.

• Education and Support. Quality and availability of training materials, webinars, and one-on-one coaching.