I don't think there are a lot of firms out there that you can walk off the street with NO experience and expect them to teach you to trade with their money. Unless of course you have an Ivy League degree. People keep talking about RBC but if this was the case they would be bombarded with resumes!
Yes... it is surely competitive. And firms receive tons of resumes, especially in this current recession. But why not try? It's during the interview where they distinguish between wannabe traders and guys that are more knowledgeable and will probably devote more hours to becoming profitable. But there's no perfect formula to selecting a candidate. It's also a numbers game... for every five candidates or so, they only need one to become profitable. If you want to come in right off the street... go to any arcade with a $5,000 check. BTW, you don't need a Ivy education. Plus no one expects a kid to have experience trading securities when he just graduates (internships at any financial firms help). Many firms like candidates who has general knowledgeable about the market but does not have any biases or baggage.
My point is simply rather than "failing" or going out of business, that this group is still in the game. It's not my task to make bueiness decisions for every trader. We assume that they are all licensed professionals, aware of the risk/rewards involved in trading. Sure, some may decide to "hang in there" and some may choose that trading is not for them. We act as a provider of capital, training organization, interaction with other traders, while providing the safety and security needed (especially these days, LOL). Some are profitable, some are not. Some trade for half an hour, some work 80 hour weeks. This is an "individual sport" - we offer capital and services. As I've said before, it appears that we must be doing something right based on our long term traders continuing support and success. Don
Great post. I agree 100%, you don't NEED an Ivy League education....but that will give you a better chance getting in the front door. Plus, we all know that "how smart" you are has nothing to do with whether or not you will be a successful trader!!
While I have no dog in this fight.....here is my 2 cents: If a newbie has a choice between trading his own money and getting 90-100% or going to a prop firm that backs you with their capital but you get 50%, it's a no brainer. GO PROP. New traders always lose at first, and some never go positive. Prop firms take 50% of the profits for a reason...they are taking on risk that guys won't make it/will fail. If they knew that every guy they took on was gonna be profitable they wouldn't ask for such a cut. As far as some of Carolina's comments. I agree that there are prop firms out there that won't let traders take out any "real" money, that will not tolerate any risk, and liquidate you once you lose a grand (which is a joke). Those firms are a joke, and unfortunately they are out there. But honestly, if a trader does his due diligence and asks the right questions , he shouldn't end up at a firm like that. It's his fault if he gets stuck there. Trust me...there are some very solid prop firms still out there that if you show them you have a good plan and more importantly have excellent money mgmt skills, they will let you trade very big size. The ones that have guys "put up" 5-20k and give you leverage, pay out 100% are most likely gonna just watch you churn your account to death, while they end up getting your 5-20k in commission. You really think that they expect a guy with 10k in an account to go anywhere? What it comes down to, if you can get in with a real firm that lets you trade real size, than you can make a hell of a lot more getting 50% trading a big account, then getting 100% trading your own smaller account. Getting a 50% cut of trading a large account is not getting "slammed" as Carolina says. It's industry standard. If you are trading a tiny account that some of these joke prop firms offer, then 50% will get you nowhere. Comes down to what firm you get into. As far as firms charging a "training fee" ? I don't want to waste much time on this...but newsflash guys........if a firm charges a fee to teach you "their method"....guess what ? Their method sucks. They obviously dont have confidence in it.....if they did they would bring guys on, teach them the ropes, then make a killing once their method was put into play. Training fees either show that the firm doesn't have a good method/technique.......or they have zero confidence in the guy they are making put up the money. Either way...run far away from these places. I have been trading for 18 years now....I have NEVER seen a firm that has a "training fee" that is any good or has guys that go anywhere. Most likely they don't have real capital to trade.....have no profitable method of trading...and no confidence in their guys. I think Carolina is misinformed on a few things. The banging around 10 to 40 k just scalping aint happening unless one has a bigger account. Most average traders dont have this kind of account. Also this isn't 1998....volatility is a lot less. As far as a 60/40 split not being a good living? yeah..if you are trading for a rinky dink firm with no capital sure. But If you can get into a firm that lets you trade size than making 60% can make you a hell of a lot more than trading your own account for 100%. All of the guys I have known/traded with who have made big money are the guys who were backed by the right prop firm/ hedge fund.......not the guys who put up their own money and got 100%.
Don Bright, I'm not being negative, but I'm genuinely curious if you have any reason for recommending that guys go independent from the get go instead of trading a shop like first new york's or schoenfeld's money to start off. Obviously there's a big market for providing leverage, as I'm sure you know, but that doesn't mean it's the best way to go. I completely understand why someone would want to go into business for themselves, I really do.... But what your suggesting is that someone who wants to open a restaurant just does it instead of taking a job at a prestigious up scale restaurant and actually learning the business, getting a salary and developing their own style. Think of it like that b/c trading for yourself IS NOT a business, it's a JOB. Big difference between the two. What you run is a business ---- you market your product, train, supply leverage, provide p and l statement, etc... You provide a service to customers, That is a business. A beginning trader isn't running a business, they are paying tuition, they should think of it as going to college b/c no matter how good they are you best believe they are paying their way thru school before they get the big job offer. As far as opening your business yourself, I know that you do what you do very well and provide a nice service for traders starting out, but nothing in this business beats a salary and nothing lets you sleep at night like knowing all your money is safe in the bank. If you go prop the worst case scenario is that you're not that good at trading you haven't lost a penny of your own money, the only loss would be the opportunity cost of wasting a year doing something that won't apply to a normal job. I'm sure that your retention rate is much greater than if somebody just did it on their own with no training, but 50% retention only means that 50% of your traders stay. You have one of the higher capital requirements as far as initial deposits go, so if a trader starts out slow he will still have capital left and on the flip side, if one of your guys blows his account out the chances are better that if he has a bulk of money to put up the first time then chances are he wants to try and do this long term and will contribute money to reload his account. This post is not to disuade people from joining your firm. Like I said previously, I know that you do offer a great service for those who are trading their own money, but to say that trading for yourself is the best way to go is a tough arguement, especially at the beginning. All the best traders I know started trading prop and moved to either trading their own money much later or leaving the prop firm to start their own firm or hedgefund. It's a great business move b/c you have no risk and can trade a big enough line that giving up the percentage doesn't even matter anymore b/c there's no way you'd have that line to swing on your own. I would much rather make 60 percent of 10 million than 100 percent of 800K. It's like your business model, there is only upside..... you don't have any of your own money in the market (meaning guys aren't trading your money) so you can't lose barring a freak occurance.
Yeh there's no way I would go to a place like Bright it seems their only incentive is to bring capital with no care or regards to whether the trader actually makes money. Besides anybody that anybody that recommends a beginner join a firm where YOU have to deposit at least 25 THOUSAND DOLLARS is NUTS. After talking to different traders it seems the only ones that have been successful when they first came into the business were so because they went to a firm where an initial contribution was NOT required. All the beginners that I know that went to places like bright lost their shirt and are no longer in the business. So i have decided that I will try to join a firm that provides free training and where i can trade the firms capital. I've been looking at different firms and the only ones I haven't heard anything negative from and don't require an initial contribution were RBC/Carlin Group, First New York, Schonfeld Group and D.E. Shaw Group. If anybody knows of any firms like these in the New York area please post it.
All of those shops are excellent, First New York probably being the best for new guys, the only thing is that alot of those shops have brought in big traders from Investments banks so it's a little harder now than before if you're an experienced guy fighting for a seat. There are alot of smaller shops that get behind guys, obviously not to the extent that the shops listed above do, around the city that are run by active day traders who take a cut of your profits and eat the loses. If you are just starting out I would highly recommend looking into some of these smaller firms if you have trouble breaking into the above listed. I think only as a last resort should a trader with no experience put up their own money b/c no matter how good you become later, as a beginner you are going to dig a hole, so why not do it with someone elses money. You are however a little off on the capital up firms though. They have a great incentive to want you to make money..... It's there bread and butter, that's how they get paid. The longer you make money, the longer you're around and ultimately the longer you pay them comissions. That is where all the marketing and promotional money is made back.... Comissions.