Trading Examples & Scenarios

Learn from real trading examples and understand how successful traders navigate different market situations while following challenge rules.

🎯 Understanding Through Examples

This guide shows you exactly how trading rules work in practice. Each example includes step-by-step explanations, calculations, and outcomes to help you understand what makes a successful trading strategy.

---

📈 Example 1: The Perfect One-Step Trading Day

Trader Profile: Sarah, $10,000 One-Step challenge account
Goal: Show how to have a successful trading day

Morning Setup (9:00 AM)

• Account Balance: $10,000
• Daily Goal: Daily P&L must be > +1% or < -1% (outside -1% to +1% range)
• Risk Limit: Maximum $1,000 loss for the day (10% daily loss limit)
• Drawdown Limit: Maximum $1,000 drawdown from daily high (10% daily drawdown limit)
• Trade Minimum: Each trade must be at least $500 (5% of account)
• Risk Per Trade: Maximum $300 risk per trade (3% of account)
• Stop Loss Rule: Must set stop loss within 5 minutes of trade entry

Trade 1: Bitcoin Long Position (9:30 AM)

The Setup:

• Bitcoin price: $40,000
• Sarah believes Bitcoin will rise to $41,000
• She wants to risk 2.5% of her account ($250) - close to 3% limit

Position Calculation:

• Stop loss at $39,200 (2% below entry)
• Risk per Bitcoin: $40,000 - $39,200 = $800
• Position size: $250 ÷ $800 = 0.3125 Bitcoin
• Trade value: 0.3125 × $40,000 = $12,500 (125% of account - too big!)

Sarah's Adjustment:

• Reduces position to 0.0625 Bitcoin = $2,500 trade value (25% of account ✅)
• Risk: 0.0625 × $800 = $50 (0.5% of account ✅ - under 3% limit)
• Sets stop loss at $39,200 immediately ✅

Trade 1 Outcome (11:00 AM)

• Bitcoin rises to $40,800
• Sarah sells at $40,800
• Profit: 0.0625 × ($40,800 - $40,000) = $50
• Account balance: $10,050

Trade 2: Ethereum Short Position (1:00 PM)

The Setup:

• Ethereum price: $2,500
• Sarah thinks it will drop to $2,400
• She wants to risk 2.8% ($280) - close to 3% limit

Position Calculation:

• Stop loss at $2,575 (3% above entry)
• Risk per Ethereum: $2,575 - $2,500 = $75
• Position size: $280 ÷ $75 = 3.73 Ethereum
• Trade value: 3.73 × $2,500 = $9,325 (93% of account ✅)
• Sets stop loss immediately ✅

Trade 2 Outcome (3:00 PM)

• Ethereum drops to $2,420
• Sarah covers her short at $2,420
• Profit: 3.73 × ($2,500 - $2,420) = $298
• Account balance: $10,348

Trade 3: Bitcoin Scalp (4:00 PM)

The Setup:

• Quick scalp trade on Bitcoin volatility
• Entry: $40,500, Target: $40,700, Stop: $40,400

Position Calculation:

• Risk per Bitcoin: $100
• Position size for $100 risk: 1 Bitcoin
• Trade value: $40,500 (405% of account - too big!)
• Adjusts to 0.125 Bitcoin = $5,062 trade value ✅
• Risk: 0.125 × $100 = $12.50 (0.12% of account ✅ - under 3% limit)

Trade 3 Outcome (4:15 PM)

• Bitcoin hits target at $40,700
• Profit: 0.125 × $200 = $25
• Final account balance: $10,373

Daily Summary ✅

• Total Trades: 3 ✅ (meets minimum)
• Daily P&L: +$373 (3.73%) ✅ (outside -1% to +1% range)
• Maximum Risk: Never exceeded 3% limit (max was 2.8%) ✅
• Daily Loss: Never exceeded 10% limit ✅
• Daily Drawdown: Never exceeded 10% limit ✅
• All Stop Losses: Set within 5 minutes ✅
• Trade Sizes: All above $500 (5%+) ✅

Result: Perfect One-Step trading day that follows all rules!

---

⚠️ Example 2: The Dangerous Day (What NOT to Do)

Trader Profile: Mike, $10,000 One-Step challenge account
Mistake: Poor risk management and rule violations

Trade 1: The Oversized Position (10:00 AM)

Mike's Mistake:

• Sees Bitcoin at $40,000, wants to "go big"
• Buys 0.5 Bitcoin = $20,000 position (200% of account!)
• Sets stop loss at $38,000 (5% risk = $1,000 per Bitcoin)
• Total risk: 0.5 × $1,000 = $500 (5% of account) ❌

What Went Wrong:

• WARNING: Exceeded 3% risk limit (used 5% - max allowed is $300)
• Position size irrelevant - risk calculation is what matters
• Challenge status: "risk_warning" ⚠️
• Warning only - system tracks risk violation but does not fail the challenge

The Cascade Effect

• Bitcoin drops to $39,500
• Unrealized loss: 0.5 × $500 = $250 (2.5% of account)
• Mike panics and cancels stop loss ❌
• Challenge status: "no_stop_loss" ❌
• Challenge Failed Immediately

Lessons Learned:

1. Never risk more than 3% per trade - this is calculated as (Entry Price - Stop Loss) × Position Size
2. Never cancel stop losses - immediate challenge failure
3. Position size is secondary - risk calculation is primary
4. One mistake can end the entire challenge - no second chances

---

🔄 Example 3: Two-Step Challenge Success

Trader Profile: Lisa, $25,000 Two-Step challenge account
Strategy: Conservative approach for Phase 1

Phase 1 Requirements

• Profit Target: 10% ($2,500)
• Daily Drawdown Limit: 10% ($2,500)
• Daily Loss Limit: 10% ($2,500)
• Trading Days: 10 minimum

Week 1 Performance

• Day 1: +$280 (1.12%) ✅ Active
• Day 2: +$320 (1.28%) ✅ Active
• Day 3: -$300 (-1.2%) ✅ Active
• Day 4: +$350 (1.4%) ✅ Active
• Day 5: +$420 (1.68%) ✅ Active

Week 1 Total: +$1,070 (4.28% progress toward 10% target)

Week 2 Performance

• Day 6: +$380 (1.52%) ✅ Active
• Day 7: -$280 (-1.12%) ✅ Active
• Day 8: +$450 (1.8%) ✅ Active
• Day 9: +$320 (1.28%) ✅ Active
• Day 10: +$500 (2%) ✅ Active
• Day 11: +$300 (1.2%) ✅ Active

Final Phase 1 Results

• Total Profit: $2,500 (10%) ✅
• Trading Days: 11 ✅
• Max Daily Loss: $300 (1.2%) ✅ (under 10% limit)
• Max Daily Drawdown: $380 (1.52%) ✅ (under 10% limit)
• Win Rate: 80% ✅

Phase 1: ✅ PASSED - Advance to Phase 2

Phase 2 Requirements

• Profit Target: 5% ($1,250)
• Daily Drawdown Limit: 10% ($2,500)
• Daily Loss Limit: 10% ($2,500)
• Trading Days: 5 minimum

Lisa successfully completes Phase 2 and receives her funded account!

---

🎢 Example 4: Handling Market Volatility

Trader Profile: Emma, $50,000 One-Step challenge account
Scenario: Major market news causes high volatility

The Setup (2:00 PM)

• Major economic news expected at 2:30 PM
• Emma has existing Bitcoin position: 0.2 BTC at $40,000
• Current price: $40,300 (small profit)
• Original stop loss: $38,800
• Risk Limits: Max $5,000 daily loss (10%), Max $5,000 drawdown (10%)

Pre-News Risk Management (2:25 PM)

Emma's Decision: Tighten stop loss before news

• New Stop Loss: $39,800 (protects most profits)
• Reason: High volatility expected, protect capital
• Risk Reduction: From $240 to $40 potential loss

The News Impact (2:30 PM)

• News is more positive than expected
• Bitcoin spikes to $41,500 in 5 minutes
• Emma's position now profitable by $300

Managing the Spike (2:35 PM)

Emma's Actions:

1. Partial Profit Taking: Sells 0.1 BTC at $41,400
2. Profit Locked: $140 secured
3. Remaining Position: 0.1 BTC, lets it run
4. Trailing Stop: Moves stop to $40,500 (breakeven)

The Reversal (3:00 PM)

• Bitcoin starts falling rapidly
• Drops to $40,200, then $39,900
• Emma's trailing stop at $40,500 gets hit
• Final Outcome: $140 profit locked + small loss on remainder = $120 net profit

Key Lessons ✅

1. Pre-event Risk Management: Reduced risk before news
2. Partial Profit Taking: Locked in gains during spike
3. Trailing Stops: Protected profits during reversal
4. Emotional Control: Didn't get greedy or fearful

---

🚫 Example 5: Common Failure Scenarios

Scenario A: The Stop Loss Remover

What Happened:

• Trader sets stop loss correctly
• Position moves against them
• Panic sets in, removes stop loss "temporarily"
• Result: Immediate challenge failure ❌

Lesson: Never remove stop losses, ever.

Scenario B: The Tiny Trader

What Happened:

• Makes 5 trades of $200 each (2% of $10,000 account)
• All trades are profitable, makes $50 total
• Problem: Trades below 5% minimum size ❌
• Result: Day doesn't count, challenge progress lost

Lesson: Every trade must meet minimum size requirements.

Scenario C: The Revenge Trader

What Happened:

• Loses $150 on first trade
• Tries to "get even" with bigger second trade
• Risks $400 (4% of account) on revenge trade ❌
• Result: Challenge failure for exceeding risk limits

Lesson: Accept losses and stick to risk management rules.

Scenario D: The Drawdown Violator

What Happened:

• Account starts at $10,000
• Makes profit to $10,500 (new daily high)
• Later drops to $9,500
• Drawdown: $1,000 (10% of original balance) ❌
• Problem: Hit 10% daily drawdown limit
• Result: Challenge failure

Lesson: Monitor drawdown from daily peaks, not just losses.

---

💡 Pro Tips for Success

1. Challenge Type Selection

One-Step Challenge:

• ✅ Faster path to funding (single phase)
• ✅ Higher profit target (10%)
• ❌ Same risk limits as Two-Step (10% drawdown, 10% loss)
• Best for: Experienced traders with proven strategies

Two-Step Challenge:

• ✅ Lower entry cost
• ✅ Same risk limits (10% drawdown, 10% loss)
• ❌ Longer process (two phases)
• Best for: New traders or those building confidence

2. Position Size Calculator

Before every trade, calculate:

// Risk Management Formula
Maximum Risk Amount = Account Balance × 3%
Position Size = Maximum Risk Amount ÷ Risk per Unit

// Minimum Trade Size Formula  
Minimum Trade Value = Account Balance × 5%

// Example for $10,000 account:
Max Risk = $10,000 × 3% = $300
Min Trade = $10,000 × 5% = $500

3. Daily Tracking Checklist

• [ ] Made at least 3 trades
• [ ] Each trade ≥ 5% of account
• [ ] No single trade risk > 3% (max $300 on $10K account)
• [ ] All stop losses set within 5 minutes
• [ ] Daily P&L outside -1% to +1% range (must be > +1% or < -1%)
• [ ] Never exceeded drawdown limit (10%)
• [ ] Never exceeded loss limit (10%)

4. Risk Management by Challenge Type

Both One-Step and Two-Step Limits:

• Daily Drawdown: 10%
• Daily Loss: 10%
• Profit Target: 10% (Phase 1), 5% (Phase 2 for Two-Step only)

---

🎯 Challenge Completion Strategy

One-Step Strategy (10 days to 10% profit)

• Week 1: Focus on consistency, aim for 1.2-2% daily
• Week 2: Increase to 2-3% daily to reach 10% target
• Risk Management: Never exceed 10% drawdown or 10% loss

Two-Step Strategy

Phase 1 (10+ days to 10% profit):

• More conservative approach
• Utilize 10% loss limits for larger positions
• Target 1.2%+ daily average (must exceed 1% minimum activity)

Phase 2 (5 days to 5% profit):

• Same risk management (10% loss limit)
• Focus on consistency over large gains
• Target 1.2%+ daily average (must exceed 1% minimum activity)

---

📞 When You Need Help

Red Flags to Watch For:

• Consistently hitting risk limits
• Struggling to meet activity requirements
• Emotional decision making
• Confusion about challenge rules

Resources Available:

• Live chat support during market hours
• Community forums with experienced traders
• Challenge rule clarifications

Remember: Choose the challenge type that matches your experience level and risk tolerance. One-Step offers faster funding but requires the same risk management as Two-Step, while Two-Step provides more time for learning and development through its two-phase structure!