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ronin266
Registered: Jul 2006
Posts: 241 |
06-07-12 03:48 PM
Quote from Dura:
This is pretty funny! Is this how a prop firm operates?
Some at least. But I don΄t see this form of operating as "riskless". I mean, what if a trader always is winning, but his wins are only a % of the risk that you taken in the contrary position. You would be losing more of "your" money than they earning in the markets. That could end with a bankruptcy
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newwurldmn
Registered: Apr 2011
Posts: 2614 |
06-07-12 03:59 PM
Quote from 1a2b3cppp:
For example, you hire 20 people. Each of them puts up $5,000. That's $100,000 right there.
15 of these people lose $500 their first week. Their "accounts" are now worth $4,500 each.
You took the opposite of their trades so you actually made $7,500.
5 of the people were profitable. Let's say they each made $500 their first week. Their "accounts" are now worth $5,500 each.
You took the opposite of their trades so you actually lost $2,500.
Your net profits at this point are $5,000.
Your firm has a 50/50 split so each of those people gets paid $250.
After you pay your people 50% of their $500 winnings, you have paid out $1,250.
Your profit for the week is $3,750.
Repeat. Encourage people to over trade so they lose more money. The more they lose, the more you make. When they blow their accounts they can deposit more money or you can fire them and hire new people.
In the event you get someone who is consistantly profitable (unlikely), just set it up behind the scenes so his trades actually go through and make money on his trades.
You are forgetting the desk fee and the "commissions" which are zero since it's really just side bets with you 
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1a2b3cppp
Registered: Sep 2008
Posts: 2494 |
06-07-12 07:26 PM
Quote from ronin266:
Some at least. But I don΄t see this form of operating as "riskless". I mean, what if a trader always is winning, but his wins are only a % of the risk that you taken in the contrary position. You would be losing more of "your" money than they earning in the markets. That could end with a bankruptcy
The chances of actually hiring a profitable trader, not to mention profitable enough to actually win more than everyone else combined is losing, are slim, especially when there are all sorts of crazy rules like you HAVE to trade certain size and you HAVE to close all positions at the end of the day.
I think some places even make you trade a certain amount per day. So even if there are no setups, you still have to trade.
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Clubber Lang
Registered: Jun 2008
Posts: 2114 |
06-07-12 07:53 PM
Prop business plan-
Take time machine back to 1997.
Recruit any person who has hands to be a trader.
Charge OBSCENE commissions.
Have the traders recruit their friends into the business.
Charge them OBSCENE commissions.
Print money during the NASDAQ bubble and burst.
Watch traders drop out like flies.
Close prop shop and retire with tens of millions in commission profits.
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Good luck. Tell us how it works out.
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1245
Registered: May 2012
Posts: 510 |
06-07-12 08:16 PM
If your really looking to start a traditional prop firm where you hire traders with no deposit, provide training and support and allocate capital toward strategies that are working, so you , your investors and the traders can all thrive (For equities and option trading):
-Raise over $5M. With over $5M, you can open a Customer Portfolio Margin account and receive excess leverage during the day and CPM at night.
-Come up this a fair compensation plan for your traders and include benefits like health insurance and small draws against a percentage of profits.
-Start every trader with about a 25% allocation of what you will eventually offer until they show profitability.
-Guide them, don't let them gamble
- Run it like a business.
-Hire a GOOD risk manager
-Have an max draw down for every trader.
-Have fun, build a relationship with your traders and they will never leave.
You don't need to be a BD to do this. You need lots of capital, good people and lots of rules.
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ronin266
Registered: Jul 2006
Posts: 241 |
06-07-12 08:26 PM
Quote from 1245:
If your really looking to start a traditional prop firm where you hire traders with no deposit, provide training and support and allocate capital toward strategies that are working, so you , your investors and the traders can all thrive (For equities and option trading):
-Raise over $5M. With over $5M, you can open a Customer Portfolio Margin account and receive excess leverage during the day and CPM at night.
-Come up this a fair compensation plan for your traders and include benefits like health insurance and small draws against a percentage of profits.
-Start every trader with about a 25% allocation of what you will eventually offer until they show profitability.
-Guide them, don't let them gamble
- Run it like a business.
-Hire a GOOD risk manager
-Have an max draw down for every trader.
-Have fun, build a relationship with your traders and they will never leave.
You don't need to be a BD to do this. You need lots of capital, good people and lots of rules.
Thanks for the info, that is the plan, but I΄m seeking how to put that in paper, cause the investors wanna find more risk capital from other people and will be showing the bp in their circles.
All traders will have a small salary (everyone will be backed) during the training period and until they become profitable, all health/social stuff included and a psychologist lol. There would be a problem finding a good risk manager, I don΄t where to search for one, I would need a professional guy or someone with experience in trading?...
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