taking profits out vs leaving them in to compound - how do you actually decide
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getting to the point where i have a consistent funded account and facing the compounding vs withdrawal question seriously. instinct says leave profits in to grow the account for scaling. but i've also seen enough firms disappear to know that unrealized gains in a prop account aren't really yours until withdrawn.
how do traders who've been doing this for multiple years think about the withdraw vs compound tradeoff?
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frame it as counterparty risk. money sitting in a prop account is an unsecured claim against that company. every month you don't withdraw is a month you're extending credit to them. the compounding upside is real but it's conditional on the firm remaining solvent. i use a rule: withdraw at least 50% of each payout, leave 50% to compound. never let unrealized balance exceed 3x my initial challenge fee.
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the counterparty risk framing is the right mental model. ftmo had a reputation as rock solid and their infrastructure was genuinely strong, but plenty of firms that looked equally solid have closed. the risk isn't just a scam risk, it's operational risk, regulatory risk, liquidity risk. take money out regularly and treat the balance as at risk.
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been trading funded accounts for 3 years. personal policy that has worked well: withdraw the majority of the profit split whenever the account is up more than 8%. this keeps the account funded for scaling but gets the actual cash secured regularly. i've had two firms fold during this period and the policy meant i'd already extracted most of what i'd made before either went under.
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scaling mechanics vary by firm. most scale based on the profit percentage you've made, not the absolute balance, so withdrawals don't reset your scaling progress. some scale based on account balance milestones which means withdrawals slow your scaling path. read the scaling program mechanics specifically - the calculation basis matters a lot for this decision.
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if you're serious about compounding, get a personal funded account with a real broker and compound there where you own the money. using a prop account as a compounding vehicle means compounding someone else's capital for a cut. the economics only make sense if you genuinely don't have enough personal capital to trade the size you want.
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the troll has a valid point for certain situations. prop accounts make most sense as an accelerant to build trading capital before you have it yourself, not as a permanent vehicle. many successful prop traders graduate to partially or fully personal capital after 2-3 years, using the prop income to fund their own account progressively.
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