Does anyone know of a direct access broker who can manage risk like some of these retail prop firms? The firms I have contacted will close out trades and lock your account for the day if you lose a set %, such as 5-10% of your deposit? This is the appeal to me of these prop firms because they are a backup to control losses and this is reason number one why traders fail.
TransAct has just as you described. They allow you to lose a set dollar amount. When hit, they cancel your open order book, liquidate you at the market and lock you out
How about putting in a stop loss at the level you would want the firm to close you down for the day? it is that simple. You will then be closed out at the market once your stop is hit.
Maybe you are just being a smart ass. Are you aware that professional traders all have a risk manager to control their losses? There are cases where traders became millionaires when they had a risk manager and then lost it all when they left the firm to trade independently. Do you realize that this is the number one reason why people fail in trading? I think all the brokers should offer this so the failure rate is not so high.
My point is not to be a smart ass I was being serious as you sound amatuerish (don't get insulted). As far as I know there is no police in this business. Merril Lynch will watch out for their $, not yours. I think you may be able to have you account frozen after you hit a certain $ loss that you designate but it may not be the perfect 'look over my shoulders' management that you seek. No firm is going to sit there and police your trades. As far as what you said that you read in some amatuer night book, if these firms are so watchful on Risk Management please explain the losses in BSC? You certainly won't find it in a Prop Shop. Just enter a Stop Loss, as I said it is this simple.
All I am looking for is a firm to provide a daily loss limit which in the professional firms would be a percent of account. I do not seek any "looking over my shoulders". Ive been trading since 2001 and full time since 2005 so I am no amateur. If Merrill Lynch as you say only watches themselves, the question is why do prop firms offer risk management but firms like Tradestation, IB, Ameritrade,etc do not. These prop firms offer this on independent account where the trader keeps 90-100% of profits, so the small slice they get I would not consider "their" money. They are protecting the TRADER so he can be profitable over time, knowing that big losing days ruin most everyone, not slow steady losses. By the way the story about pros losing it all when they branch out is true. As for Bear Stearns, that example has nothing to do with what what I am discussing. I am referring to daily risk control on traders who trade liquid instruments like stocks and futures. For me, it would be stocks. The problem with BSC is they were focusing on mortgage related products and they were overleveraged, I believe about 30-40x. Also these markets became very illiquid with almost no bids and often no one knowing their true value. In fact, in many cases the value will only be known in 30 years once the default% is known. Finally, if you ever daytraded you would know stocks can have very explosive moves and this is where a backup risk control is important. Look at RMBS today, up $5, 25% in 5 minutes.
As much as I hate to say it, I agree somewhat with piranah. I would really hate to think I made a bad trade early one morning and "for my own protection" my account gets locked and I miss out on some good trades later in the day. I would probably break my keyboard and throw my monitor out the window. Learning to mitigate risk is the fundamental priority in learning to trade. Managing risk is simply the art of learning to eliminate big losses, letting your small wins neutralize your small losses, and leaving only your big wins to yield your profit. Until you learn to do that you will never be a successful trader and all locking your account will do is postpone the inevitable. This is a lesson I was taught before I started trading and using this philosophy my very first year of trading I made 12 trades. Of those only 3 were big winners and the rest were either small losers, or small winners (thats only a 33% Win/Loss ratio). Even losing twice as often as I won, my return for the year was +5% which wasn't a lot, but at least I didn't wipe my account out and it was still better than the return I got in my Wells Fargo saving account. The secret was those 3 "big wins" were 13%, 6.6%, and 4.7% gains while the small wins/losses were only in the 0.3% - 2.8% ranges with one big loss of 7.8% b/c I screwed up on a stop order.
So this is a way to "force" discipline for someone who can't do it for themselves? Sounds a bit scary...somewhat like treating the symptom not the illness. Meaning, even if the firm shuts you down for the day you will still have the underlying problem of no discipline, and that will manifest itself in other ways (bad trades, risky behavior, et cetera).