January 2023 - Trade The Pool - Stock Trading Prop Firm

Prop Traders Vs Broker Traders

Posted on January 31, 2023October 10, 2023 by Ophira Top

Looking for a broker?

WHY, OH WHY WOULD YOU WANT TO DO THAT??
Here are 5 GREAT reasons why you should STOP trading with a broker!

Pro Traders with Prop Trading Firms

If you are as passionate about trading as we are, you can’t help but notice how impressively fast the Prop Trading industry has evolved and how fast it has come. In the last few years alone, Trading Prop Firms competing in their continuous search for talent have come to offer increasingly higher trading capital, lower barriers to entry and a diversified number of programs that can accommodate most trading styles and needs. Then, as if it still wasn’t enough, they have gone and topped it all up with outstanding quality tutorials in the form of blogs, videos, interviews and much more.

Now, since most brokers do not offer any of that, one could say that any competition with Prop firms would be lost before it even starts and that Retail Brokers have become obsolete. However, that wouldn’t be completely true. The best brokers often offer a free demo account which is great to learn and practice before getting serious and joining a Prop Trading Firm but… yes, apart from that, Retail Brokers actually have become pretty much obsolete.
Let’s see why, shall we?

5 Reasons why Prop Firms are so much better than Retail Brokers.

The Trading Capital

A.K.A. “the money”!
That’s right – the money – we’ll start by going straight to the Brokers’ jugular with this one.

Once the decision to invest in themselves and improve their lives is made, retail traders are able to gain at least a basic level of trading knowledge and education from the insane quantity of online content and material. However, funding an account with enough money to make it worth trading is not always as easy and as immediate.
Prop Firms came, saw and solved the problem.

Nowadays, just a few hundred dollars of investment on your part can give you access to trading capitals 100s times larger and more. Literally!
If you trade Forex, you’ll know that once you passed The5ers’ challenge, for example, you’ll have effectively transformed your $95 investment into a $100K trading account! Whilst if you are more of a stock trader, you’ll know that you could enjoy virtually uncapped purchasing power and up to $3900 risk allowance for your $475 initial investment and trade with more than $160K of buying power whenBECK you trade for TradeThePool.

The best thing about Prop Firms’ trading capital is that it increases much more easily and faster than it would otherwise.
Let’s put it this way: a 10% gain on your standard Retail Broker account would mean your trading account has now grown by 10%. And that, by all means, is not bad at all. That is until you realize that a 10% gain with the right Prop Firm would probably mean that your trading account has just doubled and… you know, a hundred per cent is better than 10.

The Risk

Unfortunately, it’s a known fact that a great number of aspiring retail traders rely on their emotions and gut feelings as part of their trading strategy – with unsurprisingly catastrophic consequences.
Part of the emotional turmoil that beginning traders go through is due to the stress of having their own money at risk. Then again, the mere possibility of losing a large sum of one’s own money would be sufficient reason to cause stress to even the more experienced traders.

So… what if, in addition to a super large trading capital and a fair share of your trading profit, you could also have no risk to your own money, no legal liabilities and none of the downside if things should go sour?

Well, that’s exactly one of the advantages that trading for a Prop Trading Firm presents and one heck of a reason why it’s much better than going at it solo with a Retail Broker.

The Discipline

As reasons go, this is another big one.

Discipline – or better, the lack of it – is considered to be the primary reason why beginning Retail Traders lose money and blow up their accounts. For Prop Traders it’s not different. It requires discipline, focus, commitment and consistency to be accepted and welcomed as a funded trader by a Prop Firm you’ll need all four.

Through the implementation of a few simple and clear trading rules, Prop Firms also ensure that their traders stick to that same discipline throughout their trading experience and this, in turn, translates to more traders remaining consistently profitable and, eventually, becoming successful.
This could probably explain why statistics show a higher rate of success among Prop Traders than among retail ones.

Prop Firms Are on Your Side

It is true, some brokers do offer some tutorial content which is free and accessible to everyone. That’s better than nothing, sure, but it’s only really basic stuff and mainly focused on bringing more customers in. There is no added value when compared to everything else that can be found online for free. And… there is a reason for that.

Retail Brokers do not care if you are consistent and successful or not; in fact – let’s face it – they don’t really care if any of their customers make money or lose. And why should they care? The nature of their business means brokers earn commissions on your trades whether they are winning or losing once. I should imagine that a retail broker would earn very similar commissions whether you make a million dollars or you lose it.

On the other hand, Prop Firms earn a share of their traders’ profit and are, therefore, more motivated to root for your success, offer more prompt customer support, better tips & advice and great quality educational content. And that, of course, is what everybody likes.

The Community

Retail Trading is mostly a “solo game” and can be a lonely experience sometimes. Most retail traders work from home or small offices and, more often than not, they are alone and isolated whilst doing so.

Trading for a Prop Firm also means being part of a closely knitted trading community that shares opinions, advice and ideas through social media discussion groups and periodic video conferences and interviews.
Prop Traders can confront their ideas with their peers and learn from one another while progressing towards the next “doubling” of their accounts.

In Conclusion…

Practicing your strategy on a Retail Broker’s demo account should always be part of your learning process and opening an account with a limited size capital can improve your confidence with real money management that will surely help you when the figures become significantly higher. But the advantages that Prop Firms can offer are unparalleled and Retail brokers have long stopped being a match.

Under all aspects considered, it is clear that Prop Firms are by far the best option to maximize capital, profit and experience while also accelerating one’s trading career process.

Learn about the fundemental aspect of trading in our fundamentals category

Quantitative Easing – What the FED Giveth…

Posted on January 24, 2023December 17, 2024 by Ophira Top

Now that we all know that the Fed can (and does) lower the interest rate to boost economic growth and employment or it can raise it to fight inflation, let’s talk a little about the other, relatively new – power that the FED has at its disposal: money printing. A.k.a. Quantitative Easing (QE).
The power of printing money whenever you need it would seem like a dream for anyone but, as we all know, with great power comes great responsibility and this is no exception.
Powers and responsibilities regarding QE are the focus of this article – the fourth of the “Federal Reserve System” series – and to better comprehend it all, we need to take a quick jump back in time to 2008.
Heck of a jump, I know but, then again, a heck of a year too; stay with me.

Where did it all start

During the economic crisis of 2008, GDP fell by 4.3% making it the worst recession in 60 years.
In the US alone, 8.8 million people lost their jobs and 6 million houses were repossessed. In Wall Street, the bear market lasted 17 months and was enough to “rob” the S&P 500 of half its value.

On 15 September 2008, Lehman Brothers, the World’s fourth-largest investment bank, shocked the World by filing for bankruptcy. The stock market crashed. People kept losing their jobs. Banks did not trust other banks and businesses and refused to lend to either as well as to the public.

The recession that changed everything

2008 was the year (and a half) of the Great Recession but it was also the year the FED made two important, “everything-changing” decisions.

The first decision was made upon the realization that, given the intricacies of “investment globalization” and the amount of capital it represents, some businesses are, literally, “too big to fail”.
It could be argued that the ramifications of this decision are anti-capitalism and going against “free market spirit” (and it was argued. Animatedly too) but from the FED’s perspective, protecting the economy and maximizing employment is part of the mandate and it must adhere to it… apparently, at all costs.
The concept referred primarily to banks and large insurance companies but there is no real clear restriction and once Pandora’s box is open, there is no putting anything back.

The second decision the FED took might have been viewed as even more drastic and it was made after realizing that the economy risked imploding due to a lack of credit and capital. It lowered its interest rate target from 4.5% at the end of 2007 to just 2% in September 2008 but the cost of credit wasn’t the issue; trust and credibility were. Banks were determined to avoid any risk amid the turmoil and kept refusing to lend to one another as well as to businesses. That’s when the FED created a new way to fight a recession and “printed” its way out of it.

Quantitative Easing (QE)

In previous articles of this series, we have talked about how the FED can change the interest rate to influence the availability and cost of credit. We know that to do this, the FED raises or lowers the interest it charges to other banks (the Federal Funds Rate) and that this creates a ripple effect that affects the interest rate on all the other loans.

But there is another way to inject capital into the markets and the economy; a faster and more efficient way: Quantitative Easing.

Starting in Japan and used in the US for the first time during the 2008 crisis, the process consists of the Central Bank buying Government bonds and other securities (mostly mortgage-backed) from the open market and paying for them with money that the FED can digitally create themselves.

This powerful monetary policy has the double effect of making bonds more expensive (and, therefore, stock more attractive) and injecting a huge amount of money into the economy which provides banks with a greater incentive to lend.

Being able to create money from seemingly thin air – added to that of manipulating the interest rates – would undoubtedly seem like the best “superpower” to have to prevent any recession, yet the new policy was, at first, received with anger, criticism and protests with tens of thousands of people marching in the streets.
In 2008, it wasn’t easy – and it will never be easy – for the FED and the Government to explain to “The People” why some businesses could not be allowed to fail. It was hard to explain why huge investment banks had to be saved even if considered “the cause of the crisis”. And, it was hard to explain to “ The People” why they had to be forced through a long period of austerity and forced to help those businesses against their will.
It is all very understandable.

However, the truth is that it is really hard to imagine what the outcome would have been had the FED not intervened.
The American economy is notarially strong and resilient but the pillars that support it can be a little more brittle and need regular management. That’s what the FED does and, as we now know, that’s the FOMC mandate.

During the Great Recession, the FED QE managed to finance Government’s guarantee and bailouts worth £498 billion which helped restore trust and sentiment in the market. The abundance of funds, higher cost of bonds and low-interest rates have all pushed banks to compete with one another for a share of the lending market.

The economy flourished and kept flourishing. GDP increased year after year while the stock market reached a higher and higher level. Unemployment was low and “The People” had higher incomes and started spending more. Way more.
Everything was great. The recession was over and it was the beginning of a bull market that carried on and reached its highest level in 2021.

There has to be a catch

Of course there is.

It is true; since the 2008 crisis, the bull market and “the happy days” have never stopped but it is also true that neither has the “printing” nor is the ultra-low interest rate.
The FED has continued quantitative easing without interruption since 2007, when it first introduced the policy. This, many argue, gives the American economy an artificial advantage which may not always reflect real economic growth and can, therefore, result in high inflation, market bubbles and public discontent.

In the article on “Inflation”, we have already seen the damages that “too much money” in the system can create to the economy if it’s not equally matched by a growth in GDP. In this article, as well as in the one on “unemployment”, we’ve seen the troubles that can occur when the money in the system is instead not enough.

The Fed’s set of tools is powerful but its job is not simple. The perfect equilibrium of economic bliss is hard to find – let alone achieve – in a market that is, by nature, free.

The current economic downturn and high inflation are the newest challenges for the FED.
The money printed in existence and put in circulation during the 2008 recession is shadowed by the money created during the Covid pandemic.
High inflation was to be expected; the war in Europe perhaps wasn’t.
With the Russian invasion of Ukraine, the high inflation level post-pandemic – which was thought to be only temporary – escalated due to sanctions and major disruption in the supply of energy and food commodities. The Fed had to take hard and unpopular decisions and it certainly did so but… this is a topic for another future article. Stay tuned.

Learn more about the fundemental aspect of trading in our fundamentals category

Inflation – The Other Side of the… Dollar Bill

Posted on January 17, 2023August 17, 2023 by Ophira Top

Here we are on to the third article of the “Federal Reserve System” series.
In the previous articles, we talked about how the Federal Reserve System is formed and explained how it and the Government can collaborate to boost the economy and the employment level. We have also described the Federal Reserve System as the organization responsible and entrusted with maximizing employment levels and safeguarding the American economy.
In this new article, we’ll learn about “inflation” and find out what “safeguarding the American economy” is all about.
Ready? Let’s do it!

What is Inflation?

Considering the fact the Fed can easily increase the amount of money circulating within the economy, one might wonder why the Fed doesn’t do just that all the time. After all, if all that’s needed to boost the economy is to inject money into it, why should the Fed ever stop “printing”? Right?

Well, the truth is that “too much money in circulation” is just as bad as “not enough money in circulation”.

Each time the Fed modifies monetary policies in favor of supporting the economy and maximizing employment – especially when done in tandem with the Government’s fiscal policies – it has the effect of putting more money into people’s pockets and companies’ balance sheets. People and Companies have more money to spend and will generally want to do so.
In a healthy economy, growth in GDP and the availability of products and services are proportional to the growth in private and corporate buying power. When this is the case, a growing demand is satisfied by a growing supply; The Fed does not need to intervene, free market’s rules apply, the economy remains healthy and everybody’s happy.

However, when the economy is not so healthy…

When there are problems in the economy and the Fed feels the need to intervene to prop it up, things can change – and they can change very quickly.

If the GDP is not growing fast enough, for example, injecting large amounts of money into the system often creates a situation where supply cannot satisfy demand which translates to “more money competing for fewer goods”. When this happens, naturally, sellers raise prices higher and higher meaning “more dollars are required to pay for the same goods and services”. The currency is de facto devalued and it is this currency devaluation that takes the name of “Inflation”.

What can cause inflation?

The primary reason for inflation is an imbalance in the market that causes unsatisfied demand.

The reasons for that imbalance, however, can be many and they can affect demand as well as supply.
A really bad season for agriculture, for example, often leads to reduced food production. Even with the number of people needing food (demand) unchanged, the short supply would mean higher food prices.
At the beginning of the Covid pandemic, facemasks and hands-spray were known to be sold for exorbitant prices due to sudden increased demand met by “surprised and unprepared” manufacturers. In that situation, it was the demand that increased drastically whilst the supply was (at least at the beginning) the same as it always was.

Some products and services are bought, used and sold across different industries and affect different markets. Demand and supply imbalances in those products and services can cause high prices across the spectrum and all markets.

Now, some fluctuation in price is the norm in a free market; in fact – and as a trader, you would know – it’s what makes free markets work.
Steady and measured price increases (inflation)are considered a good sign of a healthy economy but only when matched by increased production as well as increased buying power (higher wages and salaries, lower taxation, cheaper credit for business etc).

In an ideal world with an ideal economy, prices should always be rising in dollar terms but never in “disposable income percentage”.

How is the Inflation Rate measured and how often is it released?

Said simply, the Inflation Rate is an indicator of increases in the cost of living and production from one year to another in percentage terms and it expresses variation in purchasing power of businesses and consumers.

In the US, measurements are taken and published by the Bureau of Labour Statistics (BLS) which produces (amongst others) the CPI and Core CPI inflation figures and the Bureau of Economic Analysis (BEA) which produces the PCE inflation figures instead.

Although varying in nature (more details in the next article of the series), both “bureaux” track prices of an “imaginary shopping basket” always containing the same products and services. Changes in the price of the basket are then interpreted as “inflation” if they are increased or “deflation” if they have decreased. A high level of either is not good for the economy.

Inflation rate releases are a monthly occurrence and one that can create enormous volatility and opportunity in the markets.

What can the Government and the Fed do to reduce inflation?

The Government

From the Government’s point of view, high inflation means high production and import costs that lead to a high cost of living for voters and, consequently, a lower approval rate. And that’s the bottom line.
However, as goods and services prices grow higher and higher, it is only natural that more and more people are no longer able to afford them. This could mean higher Government expenses on welfare which, again, effectively puts even more money into the economy at a time when there might already be too much.

When inflation is caused by an overly high demand – rather than a restriction in supply as is currently happening – what the Government and the Fed normally tend to do is to try to slow down the economy.
When Inflation is caused by an issue in supply, the Government tries to tackle that issue through investments and, on rare occasions, price limiting and control.

When fighting inflation, amongst other things, the Government can:

Increase tax on products and services: this can help create a curb in demand that can “force” prices to be lowered.
Increase general taxation: again, this can help reduce the private and corporate spending power and limit demand.
Lower duties on some imports: with the intent of increasing supply.
Invest: The government can actively invest in the production of products and services that see their price inflated to increase their supply or in projects that lead to a reduction in demand (i.e. offering incentives to insulate homes to reduce demand for energy)
Reduce public spending: to reduce money in the system.

The Federal Reserve System

Some Countries have experienced inflation levels such that their currencies have become “useless” virtually overnight. But it doesn’t have to get to those levels to cause any economy to fold and crumble.
An inflation rate of about 2% is considered ideal for a strong economy and making sure that it doesn’t stray too far above or below the target is the Fed’s most important duty. It is directly at the heart of “safeguarding the American economy” and it is so highly valued that it is given priority even over maximizing employment.

When inflation reaches levels too high, the Fed can intervene by manipulating the amount of money in the economy to try and solve the problem. It cannot do anything to increase the supply side of things but it has great powers when it comes to “suppressing” demand.

Amongst the different ways the Fed can try and tackle inflation, the two that are most effective are:

Increasing interest rates: and, by doing so, making money, credit and debts more expensive.
Selling Treasury Bonds to the open market: by doing so, it literally swaps Bonds for cash which leads to a reduction in money in the system which should translate into lower demand.

When are Inflation Rates released and why are they important for traders and investors?

Inflation rates are released monthly and refer to the previous month. They assume major relevance really only when they start being too high or too low.

Traders and investors know that in times of very high inflation (or even deflation), both the government and Fed are bound to intervene.

It is important to note that the steps the Fed needs to take to fight inflation are different – and opposite in nature – from those it needs to take when focusing on maximizing employment.

Maximizing employment and fighting inflation are the Federal Reserve System’s mandate and in particular, they are the FOMC’s mandate. Yet, they often seem to stand on two different pans of the same scale. Any adjustment on one side risks provoking a contrary effect on the other. There is no better example of this than what is currently happening in the US and the Worldwide economy.

In the next article of the “Federal Reserve System” series, we’ll talk about Quantitative Easing (QE) and Quantitative Tightening (QT) as part of the “FED’s arsenal” to fight both inflation and unemployment so…

… keep an eye out for it.

I hope this helped.

If you want to prepare yourself in the best possible way for intraday trading, check out our pre market category

Alexander Got Funded Trading Penny Stocks

Posted on January 12, 2023October 1, 2023 by Tomer Dubrov

“Low your position size on trades where you are not extremely confident in” That’s Alexander’s Advice.

Alexander G., 23 years old, From the US.

Alexander has successfully passed our Super Buying Power program and is now one of TTP’s funded traders, or as we call it, “Stock Star.”

Every time he reaches 5 consecutive winning days, we will boost his buying power and max exposure.

We spoke with Alexander about his trading plan, insights, and lessons gained while trading in the markets and our platform as a funded trader.

Watch The Interview With Alexander

Tell us a little bit about yourself

This is an amazing opportunity. Thank you so much for it. My name is Alex, I’m an artist at heart, but I love day trading. I also love the gym and will go 5 to 6 days a week.

How long have you been trading?

I have been a Part-Time Trader for 5 years.

Briefly describe your Trading Plan and how it contributes to your success

I use a style of trading called moment trading. I look for stocks with a good volume between the 1 to 10 dollar range.

Share with us a challenge you faced in your trading career and how you overcame it.

Trading out of boredom and overcoming FOMO was a big problem for me missing out. However, I’m overcoming it by being more patient and only trading setups I really like.

How did you adjust risk management to your trading personality?

I’ll use low position size on trades where I’m not extremely confident in

Describe a key moment in your trading career

I lost my job back in august of 2022 due to it shutting down. I decided then that I wanted to take trading seriously and full-time. So on my first day, I increased my account size by around 10%, and the next day I did it again. I knew then it was what I wanted to do.

How long did it take for you to become a consistent trader, and what aspects did you change for that?

I started becoming consistent trading around the end of 2022. After that, I had to lower my position sizes and adjust to the bear market.

What is your mental/psychological strength, and how did you develop it

I developed my mental and emotional strength through discipline, support groups, and faith in a higher power.

What was your strategy for successfully passing the evaluation phase?

I looked for stocks gapping up with a solid volume and would buy the pullbacks and sell on the way up.

How is trading for Trade The Pool different from trading by yourself?

I used to trade pre-market and would love to have that opportunity in the future with trade the pool.

What would you recommend to someone who is just starting with us?

Take it seriously and put in your best effort every day.

Share online resources that were/are significant in your trading development. Names and links are appreciated.

Profit Chasers https://www.profitchasersacademy.net/

Would you like to share anything else with us?

I’m so glad I found you guys, and I’m very excited to be funded.