*Below is paraphrased from a X post made Aug 21, 2025 @KJFUTURES
I learned one of the most important principles of portfolio management from studying George Soros. It's a simple idea he used to manage billions, but it’s also some good advice to survive and navigate around prop firms.
It was described as "crawl, walk, run."
If you look how Soros invested, he would be very tight at the beginning of the year. I'm going to use some arbitrary numbers here to demonstrate.
He would try to get +7% returns on the year. He would "crawl" up to 7%. very tight sizing and little leverage.
Once he was up 7%+, he would increase his position sizing and leverage he would use. He would go to "walk" mode. "walk" up to +15%.
Once he was up 20%, he would use even more leverage and bigger position sizes. large asymmetric bets. in Soros case, betting a big chunk of AUM betting against the pound. "go time" mentality.
If he was in run mode and he started losing money, say going from +20% to +15%, he would bring it back to "walk mode".
Now, where I think the same or a similar approach can be mirrored to prop firms. Instead of the year timeframe, replace it with account lifespan. This applies to the funded stage specifically. Early on in your account lifespan we have talked a lot about building a buffer and working towards a platform from where you can “crawl” from.
A lot of rookies/beginners when they start in "run" mode, they aren't able to "downshift." they hit a drawdown and then start cycling and spiraling to bust. take it easy.
As a beginner, if you have never run a business before, never ran a portfolio before, never managed anything before, take it easy, find your "sea legs" first. Feel it out. Then, swing.
This chapter is about learning to crawl, walk, and run inside the prop firm game’s drawdown rules.
The Mirage.
The first mistake everyone makes is looking at the wrong number. That $150,000 account the firm gave you? It's a mirage. A marketing number designed to make you feel like a big shot so you take bigger risks. At this point in the book, you should understand that. The real number you have to look at is your drawdown and if it's distributed across multiple days.
If you have a $4,500 max loss limit, you are trading a $4,500 account. End of story. every single decision, every calculation, must start and end with that number. until you burn this into your brain, you will always be playing their game, not yours. Understand this when you risk 1% of $150,000, you’re risking $1,500. on a $4,500 account, that’s not 1%. It's 33%. you just risked a third of your account on one trade.
It’s hard for me to recommend this size or larger size than this. But this serves as a good segway.
Ammunition: The "Shots on Goal" Model.
Once you see your drawdown as your risk, and we get past percentages.then, we have to think about survival. It's about ammunition. THINK IN BULLETS.
Think of your drawdown as the number of bullets you have. If you have $4,500, how many shots do you want? three shots at $1,500 each? What if your strategy has a normal losing streak of five trades? You’re going to blow your account before your first winning trade.
This is the "shots on goal" model. You size not for the potential win, but for the expected storm. The storm is the failure funnel. Start burning thru evaluations and funded accounts. That is the storm. Make sure to size for the storm.
Look at yourself. Do you have a good dataset of your trading to get a generally sense of what your stats look like? be honest. What's the longest string of losers you’ve had? five? seven? ten? Now, design a risk model that can survive that.
If you have a $4,500 drawdown and you know you can hit a nasty streak of nine losing trades, your risk per trade can’t be more than $500. That gives you nine bullets. nine chances to be wrong before you’re done. Suddenly, a losing streak isn’t a massive deal. It's the cost of doing business. You're still in the game.
I always like going back to baseball and the baseball analogies. Don’t think of your job being to hit a home run on the first pitch. Your job is to stay alive, work the count, and long enough to see a pitch you can hit.
Crawl, Walk, Run: A Dynamic [PROP FIRM] Risk Framework.
Sizing for survival is the foundation. but to get the big payouts, you need to know when to press the gas. This is where "crawl, walk, run" becomes your system. It's a dynamic model where your risk changes based on your position in the game.
Phase 1: CRAWL (The Brakes).
-When: You just got a funded account, or a payout has reset your buffer. You are at your most vulnerable.
-Goal: Survival and building an initial profit buffer.
-Action: You are riding with your foot over the brakes. Hard stops. Your risk is a small, fixed-dollar amount that is ‘sustainable’. on a $4,500 MLL, you might risk $200-$500 per trade. This phase isn’t about “getting rich”. you are building a wall of cash between you and the max loss line. This wall is your buffer. it’s your shield.
Phase 2: WALK (The GOOD Caution).
When: You've built a profit “buffer”, but you’re still in the early stages.
Goal: Grow the buffer with calculated risks.
Action: You take your foot off from over the brake, but you’re not quite going to slam the gas pedal against the floor. Your risk is now a conservative percentage of your buffer. You should focus on consistent, high-probability setups and SIZING INTO THEM. If a trade fails, you lose "house money," but your original drawdown is untouched.
Phase 3: RUN (The Gas)
When: Your profit buffer is larger than the maximum “capped” payout (for example, on Topstep $5,000 per XFA). Now, you’ve earned the right to be aggressive.
Goal: Maximize balance BUT ALSO prioritize payouts.
Action: Gas pedal. Your risk becomes an aggressive percentage of your buffer on A+ setups (e.g., 20-40%). This is where you push your edge. This is where you build uncapped massive payouts. if a loss pushes you back into the "walk" zone, you immediately downshift your risk. no exceptions.
To Close.
These have to be your percentages, your zones. They have to fit your strategy. But the principle is universal: you protect your base, you attack with your profits, and finally scale to the limits.
My understanding and appreciation for trying to dissect the game and the prop firm model has ultimately come to this conclusion. If we have previously established the mathematical edge in drawdown to cost, if we have previously identified the obstacles that limit payouts, and if we build a model for taking risk in a controlled, logical “sound” way. That is the game. Above we have built a pretty simple and intuitive model to approach risk under funded models.
PART III: BUILD YOUR FRAMEWORK