Scaling Series: Personal Accounts

Summary

In this lecture, we explore the final stage of scaling personal trading accounts after achieving payouts from prop firms. Two key risk management strategies are discussed: the static approach for steady growth and the exponential method for aggressive scaling. The lecture also covers how to distribute profits using the 50-30-20 rule, focusing on compounding, investing, and personal financial goals. Whether you're aiming for slow, consistent growth or quick expansion, the key is mastering your strategy and psychological resilience. This comprehensive guide provides actionable insights for long-term wealth building through disciplined trading and smart profit management.

Takeaways

• 😀 Achieving a personal account size goal is essential for long-term trading growth, and this can be done by utilizing payouts from prop firms.
• 😀 Once you have reached your personal account size goal, you need to decide whether to trade both prop firm accounts and personal accounts simultaneously or focus only on personal accounts.
• 😀 When trading both prop firms and personal accounts, two different risk management strategies are required due to differing rules between the two types of accounts.
• 😀 The static risk management protocol is ideal for beginner and intermediate traders, where a fixed percentage (usually 1-2%) of the account balance is risked per trade.
• 😀 The static risk management approach allows for slow, steady compounding as the account balance grows, providing consistent risk and reward.
• 😀 The exponential risk management protocol, for advanced traders, allows you to risk profits from winning trades, scaling risk during winning streaks while protecting initial capital during losses.
• 😀 The exponential risk management protocol leads to higher fluctuations in both risk and profit, which can result in faster compounding if the system remains profitable.
• 😀 After 10 trades using exponential risk management, the profit can exceed 100%, whereas static risk management provides steady but slower growth, with a 41% increase in this example.
• 😀 The key to success with exponential risk management is psychological mastery, as the fluctuations in risk and profit can affect trader behavior if not managed well.
• 😀 Once profits are made, the 50-30-20 rule should be applied to distribute them effectively: 50% remains in the account for compounding, 30% goes towards investments, and 20% is used for personal spending or saving.
• 😀 The 50-30-20 rule is flexible and can be adjusted based on personal financial goals, such as reinvesting more in the account, increasing investments, or withdrawing more for personal use.

Q & A

What is the primary purpose of obtaining a personal trading account in the scaling process?

The purpose is to use profits from prop firm payouts to fund and grow a personal account, allowing traders to compound returns over the long term without prop firm constraints.

What are the two main options available once a trader has funded their personal account?

The trader can either continue trading both prop firm accounts and the personal account, or shift entirely to trading only the personal account.

What is the main challenge of trading both prop firm and personal accounts simultaneously?

They require different risk management approaches, as prop firms enforce strict rules while personal accounts allow full flexibility.

How does the static risk management protocol work?

It involves risking a fixed percentage of the account balance—usually 1–2%—on every trade, allowing steady compounding with minimal fluctuations.

Why is the static protocol recommended for beginner or intermediate traders?

Because the risk and profit amounts stay consistent, minimizing psychological pressure and making risk calculations easier.

What is the exponential risk management protocol designed for?

It is designed for advanced traders who want faster compounding by risking profits from previous winning trades while protecting initial capital.

How does risk adjustment work in the exponential protocol after consecutive wins?

After each win, the trader risks a decreasing percentage of the previous trade’s profit—100% on the first win, 50% on the second, 25% on the third, and so on—to capitalize on streaks and reduce risk as streaks extend.

What happens to risk after a loss in the exponential protocol?

Risk resets to the base level of 2%, and the cycle restarts.

Why does the exponential protocol result in larger fluctuations compared to the static protocol?

Because risk and profits scale dramatically during winning streaks, leading to higher volatility in both risk size and trade outcomes.

What psychological qualities are needed to use the exponential protocol effectively?

Traders must have strong emotional control, trust in their system, and the ability to handle large fluctuations in risk and profit without compromising performance.

What is the purpose of the 50-30-20 rule for profit distribution?

It ensures long-term growth by reinvesting 50% back into the trading account, allocating 30% to long-term investments like stocks or property, and using 20% for personal spending or saving.

Can the 50-30-20 rule be adjusted?

Yes, traders can modify the percentages based on personal goals, such as allocating more toward investments or keeping more in the trading account.

What was the simulated outcome of using the static protocol over 10 trades with a 70% win rate and 2% risk per trade?

A $100,000 account grew to $141,518, resulting in a 41% increase and a net profit of $41,518.

What was the simulated outcome of using the exponential protocol under the same trading conditions?

The account grew from $100,000 to $211,000, producing over 100% growth due to larger gains during winning streaks.

What is the overall goal emphasized in the lecture regarding trading and scaling?

To generate profits consistently and use them strategically—through compounding and investments—to grow wealth long term.