Margin vs Scaling

Every cycle runs in one of two modes, chosen at configuration: Margin or Scaling. They answer the same question — where should the profit come from? — in opposite ways, because the two possible endings of a challenge do not have the same probability.

The asymmetry to design around

Statistically, a prop account hitting its maximum drawdown limit is a much more likely scenario than reaching a payout. Any honest configuration has to decide what happens in the likely case (the account burns) and what happens in the lucky case (the account pays out). Margin and Scaling make opposite choices.

Margin

Margin mode focuses on achieving profit when the prop account reaches its maximum drawdown limit, at any stage. In other words: it makes the probable scenario the profitable one — when the challenge burns, the broker leg pays.

• Why use it — it earns in the scenario that happens most often. The expected net profit is lower than in Scaling, but the statistical chance of realising it is higher.
• Capital requirement — on average it needs roughly double the broker deposit compared to Scaling.
• The drawback — if the account does reach payout, the payout usually nets out the loss accumulated on the broker account, leaving little or no net profit. It depends on how the cycle is configured, but that is the typical outcome.

Scaling

Scaling mode focuses on achieving profit when the prop account reaches a payout at your live phase target — while still aiming to recover the challenge cost through the broker account if the maximum drawdown limit is hit instead.

• Why use it — it recovers the prop cost if the account burns, and leaves ample room for net profit if the account reaches payout. The expected net profit is higher than in Margin, but the statistical chance of realising it is lower.
• Capital requirement — on average it needs roughly half the broker deposit of Margin.
• The drawback — if the account burns (the probable scenario), there is no net profit: only the recovery of the cost, or a slight profit on top of it.

Choosing between them

The choice is mostly about capital and intent. Margin asks for more broker capital and pays in the likely scenario; Scaling asks for less capital, keeps the downside at roughly the challenge cost, and pays in the payout scenario. The risk adjustment slider then tunes the intensity of the hedging — and with it the expected projections and the required broker deposit — within whichever mode you chose.

For the definitions of the projections each mode produces, see Metrics & Payouts Explained.