Filed under: "Adapting to The Market (and Changing Diet) for Survival" BT Frontman former fav known as "The Vegas Opening Orders Special"
We have discussed with the other majors, but none can guarantee that they would not be going the same direction. Too many traders have auto programs with Redi, so we're trying our bet to stay with GS, and we value our relationship with GS as well. All I can say is that we're dealing with it, traders are fine. No letter from the SEC yet ("open letter" to trading firms from SEC)... we'll do whatever we can to make things right after it gets published. This may be "much ado about nothing" - in the long run. Don
i agree for a new person....but once you overcome fees trading is equity invariant. I don't buy the biggest edge is equity, its necessary but not sufficient. NO disrespect intended, and 10 years isn't a long time in the business to speak from. If you had, say, 30 years in the business, had a section in a book highlighting great traders dedicated to what you did with an MIT punch car computer in the 60s, and bought an island, perhaps then you can tell me of all the traders who go hundreds of thousands into the red and make it, but most of those guy blow out and live in a shack somewhere. 10 years is a microsecond. Its the men who don't manage risk well that end up broke. this bs about needed tons of capital is a lark. the tons of capital is for these pseudo trading firms to fee you to death..thats why the want guys with large deposits....is that so hard to see? Frims like to take on 25k guys cause they know the bulk of that goes to comms and fees....why take the time to talk to a 5k guy..thats not much in firm profit to milk. End of story. If you have a small amount of capital and your trading overcomes fees, that very quickly either on its own or by scads of people throwing money at you turns into TONS of capital, if you are in the red before you start, those two former things rarely happen.
makes no difference whether your capital base is $1 or $1M to an experienced trader. i can start with $1000 leveraged and be doubled up four time in a week to cover any real potential loss in a blowout trade. it's not that difficult. just scalp the right stock. rookies, sure. they'll lose whatever they start with, guaranteed, without a system in place restricting their decisions and movements.
How about this one: what prevents them from using the 25K to lend to other traders, and use the SPAN margin to lend 20 times as much. If leverage is 20, you time that by the interest they charge on the lending, you get a good number. If you use 3% as interest charge, the 25K can make around 13K per year. What can be worse is if a firm were to exploit the 25K and leverage by saying something like "the firm can lend 500K of our capital", when in fact it is a 25k deposit of another dude multiplied by the leverage from margins. I hope the laws prevent them from doing the above. If someone is in the prop business, could you comment on the scenario described?
the firm should be making a significant profit on the difference between the lending rate to the trader for the few hours they're trading, if calculated as a day's interest that is, and the money market rate they're being charged by their bank. a significant profit. so how the funds are distributed, to 5 5K guys or one 25K guy, matters not except as a risk management decision. my guess is, the 25K guy is probably going all in more often and generating way higher commissions than the 5K guys combined. he's also much more profitable and less maintenance. kinda like the difference between a real wife and a trophy wife. one's an expensive whore, one's a nagging bitch.
What commissions are you paying on etrade pro? I am sure they are nowhere near what prop firms can offer you.
Don, Could you please direct me to the Fin Reg notice that explicitly states the minimun 80% payout. I see you reference Reference: FINRA 10-18 - which addresses master/sub-account arrangements, however, I have failed to find anything FINRA related that mentions anything about payout percentages. Thanks in advance.
(Bright Tradng only, that's the only Firm I can speak for obviously) Response to a couple of points. Some may, but we don't have to use trades capital for the Firm's overall trading requirements. We can refund initial deposits without holding for 12 months. And, yes, I can't say for sure, but if not illegal, it should be. OK, the retail vs. prop has been beaten to death, but just a simple example. If you have $25K and can use $50K or even $100K, you are still locked out of some successful strategies. And, if you're making $20K per year with $25k retail, how much would you make using $300k prop? And, FWIW, we are working through the 80/20 thing...who knows what things will be like next year. Don