This is why we’re all here isn’t it? To extract money from the markets, and in the case of using a trading evaluator, to get to a point where we can do that with less of our own money at risk than if we were to open our own trading account.
Once you have trading skills that enable you to pass evaluations, this can be a good mindset. Pay $x for $y drawdown (where $y is less than $x!) and keep using evaluations as a way of generating trading profits with less capital at risk.
We’ve already discussed the existence and significance of the live sim environment that’s used by nearly all trading evaluators. Remember, the business model is mainly generating profits from failed evaluations, resets and live account administration fees. A small amount of profit is coming from profit share with live traders (or from trade copying of live sim trades) but for any evaluator the bulk of the profit in this business model comes from failure, not from successful trading.
As a result, profits generated in live sim trading (on trades that are not copied into the live market) actually represent a cost to the evaluator! For this reason it’s important to understand the various terminology and rules in place around profits and withdrawals that exist within the industry so that you are well-informed and can understand exactly the environment in which you are trading. We’ll dive into these areas more deeply in our next posts.
