👀 Profit caps arrive in the industry, A Personal update on my own Trading Journey + The Latest Investment Bank Research

Hey guys, it’s Kieran! Welcome to another edition of Prop Trader’s Weekly. Last week had a distinctly “risk off” feel in the markets, as well as in the prop firm industry. The Bank of Japan battered the USDJPY with a reported $89bn intervention in the Yen, and in the prop firm industry, firms continue to tighten their rules, to position for survival, whilst trying to stay competitive. I also have a personal update on my own trading journey, including the firms that I am currently funded with, as well as my payouts and goals for the year at the bottom of this mail. Big changes are on deck, so let’s get into them.

📢 Prop Firm announcements.

The biggest news of the week was MyFundedFX (as well as E8 Markets) announcing new (identical?!) 1-step programs which include a daily profit cap of 2%. This means that as soon as your account is 2% up on the day, all your trades will be closed automatically and you’ll be timed out until the next day.

Included in these plans is a 2% “soft breach” daily loss limit, meaning if you are down 2% in a day, your trades will be liquidated automatically, but you will not lose your account. You’ll be timed out until the next day. Here are all the plan details from MyFundedFX:

Of course there were a lot of questions across social media on this new approach. Matt Leech, the MyFundedFX CEO answered a lot of these below:

In terms of trader reaction, it was equally split across the board:

In terms of my personal opinion on this, I believe that having more options is good for the trader and for the firm. This model is not replacing the old ones and will act as an industry wide test to see how well it is adopted. It will suit some people and others not.

This type of model does not suit me personally as I am a swing trader so I might hold trades for weeks and months, so a 2% profit cap per day is not compatible with that trading style. However, for more short term traders, the 2% daily soft breach will certainly help them keep their accounts for longer, which cannot be a bad thing. Anyway, time will tell with how well this will be adopted.

🕜 Economic calendar

Here are this week’s red folder news events. The economic calendar is relatively light. Along with these events, we’ll hear several Fed speeches in the wake of the central bank last week acknowledging a lack of progress on inflation.

📈 The Macro View

Positioning sentiment is getting closer to ‘Streched’. The Goldman Sachs Sentiment Indicator measures stock positioning across retail, institutional, and foreign investors versus the past 12 months. Readings below -1.0 or above +1.0 indicate extreme positions that are significant in predicting future returns. This is typically used as a contrarian indicator. When positioning reaches ‘Streched’, historically we have seen short term pull backs. We are not there yet but major positions were added over the last 3 weeks. The current market condition is by no means ordinary though, and positioning can stay streched for a long time. Still notable though and one must remain vigilant when trades get crowded.

Hedge Funds net bought US equities for a 3rd straight week. As the chart above suggests, major funds were buyers last week. From Goldman Sach’s prime book, “Hedge funds were big buyers of US equities last week”. With major earnings out of the way, hedge funds probably feel that the coast is clear to buy the dip.

What do typical corrections look like in the S&P500? Well historically we tend to see 1.4 5-10% corrections per year (median) and one 10% correction (median) each year. The current correction that we are in clocks in at 6.5%, so a very normal pull back so far. No major drama yet and futures are green this morning.

Warren Buffet moving to ‘cash’. As great stock pickers will tell you, “Cash is a position”. Warren Buffet is moving more and more out of risk and into cash, saying that his cash position could reach $200bn by the end of Q2 per Bloomberg. Something to ponder. As major funds continue to add longs (highly levered!), the Oracle of Omaha is selling.

Quick check on the US election outlook. A lot will change come November, and the build up will likely be volatile. Trump is polling well despite his legal challenges. Last time Trump was president he continually called for lower rates to boost equity markets and help US family balance sheets. Whilst it seems that the market is not yet pricing it, come summer this will be a major narrative, so election polling will need to be tracked closely. Will continue to monitor.

🔥 My personal trading update

This week I posted an update on my personal trading journey and my goals for the year. The reaction to my post was overwhelming! I do not intend to turn this newsletter into a stealth bragging outlet but this year I am making an attempt at trading full time, and it might be interesting for some people to follow my progress. Currently trading is my only source of income, and I’m putting everything that I have into it, to hopefully make it work. So a full breakdown of my progression so far, my trading goals, which prop firms I am using, as well as all of my payouts this year can be found on X. Click on the post below or jump straight to my X profile here https://twitter.com/kierangohil_

OK guys, I hope you enjoyed this week’s newsletter and found it valuable. As ever, if you have any feedback just reply and let me know, or hit me up on X, otherwise have a great week and i’ll speak to you next Monday!

Kieran

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