As I already said, top traders trade, but the vast majority of risk managers in prop shops are either former floor traders or fx-traders, usually who failed to make the transition to prop when their old career died. If they were still up for trading then they would rather than take a boring job watching other people trade and trying to inject their opinions from time to time. Most prop shops get these types to teach their program, and quite simply those people should be ignored if you plan to succeed as they can't do it now and often never could. If you was employed by a very successful active prop trader who offered to teach you then it would be a different story, some of the best prop traders I have seen have taken on newbies (usually friends and family) and the results have usually been very impressive, but then you would learn from someone who was involved themselves and could explain to you on the job, watch what you did and mentor you continually every day, with that kind of support and someone who was actually good showing you your chances are hugely improved. However for the vast majority of newbies that is not going to happen and so they need to learn themselves; at least then you have a chance to succeed by IMO listening to the advice of a proven failure (ex-trader/burn-out/risk-manager) will only escort you to your demise in the markets. Its your life mate, but if I was you then don't expect to be taught well at a prop shop unless you can talk one of their best traders into teaching you, and most of those won't want to anyway. If you sign a prop deal salary or not you will still be in a sink or swim position, trust me, and your best bet will be to read lots of books from those who were hot shit (Market Wizard series is cool), and trading psychology and study the markets as much as you can during the day. Ask top traders for advice if you can, or at least successful people, but ignore the pretenders (for the record I have known of two cases where traders who failed after 1 year were taken on to TRAIN new graduates to trade so amazingly you could be learning from someone who will bull-shit you to death and knows nothing about trading well; do you really want to take advice from one of those potentially???) You need to make up your mind, but the fact that you appear so unwilling to make a decision tells me that you should go for the broking job, as if you really wanted to trade then there wouldn't be any doubts in your mind. Keep us posted as to how it all develops for you.
Mr Kamikaze and showtime23 hit the nail on the head as far as most prop firms training. They are usually lead by blowup unsuccessful electronic traders who previously might have done well on the floor as a broker. What is funny is that they usually love passing out the hindsight advice and telling stories of PREVIOUS trading success. As a new trader I can see how it would be hard to ignore their advice because you would think why in the hell would a firm put all this money into new traders and a salary and then have some blowout teaching them. I don't have the answer for that but it is common place. What someone else said early was correct in the ones that end up doing well don't listen to the teaching and figure something out for themselves. Hopefully a trader will realize this sooner so as not to ingrain money losing habits being "taught" to them. I think there are easy ways to provides incentives to successful traders to give them motivation to help newer traders but most firms never seem to do that. At least knowing this if you do take a job will help you view the teaching in a skeptical manner. What is funny that I have seen too is that once a trader becomes successful doing their own thing, the so called trainers love to take credit for their development and never put together that they were successful because they did not listen in the first place.
i guess all of us must know something that management at prop firms don't know. They got the money apparently to hire a trainer who is supposedly bad and then pay new trainees to learn from this bad trader. If for no better purpose, the firm must hire him to limit one's ability to lose money at any one given situation. That or they are just window dressing, like a harvard mba. after all, most newbs would be more attracted to a decent place with some kind of training infrastructure. I dunno. on a side note, I think newbs shouldn't even visit this site...theres no point other than to gossip and chit chat, which is what i've been spending most of my time doing. Its a good thing i'm not trading because et takes up way too much time. really the only reason I've been here is to pick up the dirt on prop trading firms. When i first heard of prop trading, I had no clue until I visited one. But i remember thinking about getting an "offer" from an arcade in NY, and thinking of just moving out there. Wow....its a great thing I researched a little and found out that "job offers" in trading aren't quite the same as other professions. If I got a job offer from optiver, i don't need to go visit the damn office...but if I had something from "chimera capital" (thats one place I just saw recently) i'd better check it out. People always talk about how GHCO is not so hot, and that they regulate what is said on ET with lawyers, complaints, ect. Well...since it always gets deleted, why doesn't someobody speak up about the things that they know. Lets here some of these tales.
I agree 100%. They love to try and claim credit for your success. I have traded prop futures successfully for 5 years now and I used to laugh at the fact that they thought they had trained me to trade, even though they had a stream of risk-managers come and go, and never did I listen to any of them. I realised at the start to ignore those hindsight traders and burn-outs, and once I did I realised that the people who had the roughest time were the people who took all their bad advice. It is hard as a newbie to ignore their poisonous advice as they are your boss and in charge, well I broke all the stupid rules that they imposed and the morons never realised that that is why I became successful. I was still disciplined and you need to be disciplined to succeed and that is NOT what I mean by breaking rules; what I mean is it is OK to lean on a fill in a spread or to scalp and not spread if the chance arises and sometimes to trade figures etc if their is a blinding opportunity that you would be mad to miss. Those suckers on risk desks forget what it was like to trade themselves and act all holier than thou, like born again christians, they forget what they felt like when trading and deliver smug advice without realizing how stupid they sound. Most of those types invent rigid rules that can't be applied in real market situations, like have a 1 or 3 tick stop, well try scalping the Dax with a rigid 3 tick stop always (IMPOSSIBLE). They forget trading is NOT a science but a bit of gut feel too, sometimes it is ok to let a trade breathe against you I mean on 9/11 the markets went the wrong way 1st but when you knew what had happened you just had to sit on the trade until it exploded the right way!! What I hate is when they try to apply rigid P&L stop losses to traders positions, I have seen loads of traders lose money and the risk team will come and say get out of the trade because you lost X amount, when the trade is about to turn around, but because they just watch your p&l and not the market they don't understand that they are wrong and not you. You should never puke a trade because you lost 5 grand, you cut a position because you are WRONG, and those guys don't see it. They don't appreciate the markets and probably never did, especially given that they don't trade every day and so don't understand the way the markets have been moving. That is why you need to learn for yourself as you are the one doing it every day and seeing what happened. I have seen loads of those guys ask what traders did when they lost and that just proves that they weren't watching you or the markets. If your boss trades sitting next to you then he can actually give you feedback and advice, but most often when a trader loses they just make presumptions like you did this or that, which they are usually wrong about. I worked at a firm where they usually just accused people of being stubborn, no matter what happened even when the market spiked they would say you went over you stop by being stubborn even if you hit the 1st price you could get. I mean those guys really don't have a clue, they essentially teach you to trade scared and to trade based on money as opposed to making sound decisions, they try to apply rigid strategies that don't work and have little to offer other than bull-shit technical advice which they never made money from or assumptions as to what you did wrong; arse-holes!! As a profitable trader I always try to help new graduates when they start, and it always alienates the risk managers who like to be the ones to dispense the advice to newbies. They like to act as though they are in charge of teaching grads and you should NOT involve yourself, when they forget that I make money and still do, and they either couldn't ever or can't now. I trade every day and see what is going on so can give feedback which they can't and I know what works and makes money. I would willingly train newbies for a cut of their profits, but the risk managers don't want that as then their job would be obsolete and they would just be position keepers for the owners, they are bored and want to act as though they are middle management and important to a traders success and so seem to struggle to accept their REAL role. Just my opinion, but teach yourself as you trade and see what happens as they don't so you are more aware than they are. Plus why listen to a proven loser? I especially love when a struggling trader is offered a risk role and suddenly they become a guru, particularly with the newest grads who never knew them when they traded and they can suddenly act like an expert in from of. I sat next to grads being bossed around by one of the worst failed traders I ever met (failed after less than 1 year of tiny trading), even though the grads had been trading for bigger and longer than the risk manager ever had, only they never knew that and never saw that risk manager trade, when I had. The risk job seems to just go to their heads and they act high and mighty forgetting how their own careers died miserably. Good luck and remember that you are the one responsible for your own success in trading.
Mr Kamikaze that post was hilarious being that we sound like we are at the same shop but we are not. It just goes to show how many of these firms are set up. I think it worked for awhile because the markets were moving around so much and a lot more inefficient. But now that many market anomalies have disappeared in the futures markets the short comings at the firms are showing up. The incentives you brought up for training a new trader are an excellent point that many firms for some reason have not used. But then again they could not bring in 10-15 people at a time and do that. The other big thing you mentioned about being taught to trade scared is so true. It seems many places teach how not to lose money but it is never brought up how to make it. All defense (if you call enforcing 1 tick defense) and little offense.
great posts. I've always been a bit of a contrarian; I will keep your opinions on risk management in mind as they may very well apply to me in the future.
I believe that the problem with these firms is that the risk managers forget their job title of RISK manager; they are NOT supposed to be PEOPLE managers, and seem to forget that. The problem is that in the absence of anyone to train the newbies most prop firms will tall the risk teams to coach or guide newbies, to answer questions and give emotional support to newbies with doubts. But those risk fools take that as meaning that THEY are the office boss, and the teachers of the recruits, and given that the newbies are often the only traders who will listen to their bull-shit they love to dispense it. Usually risk types are frustrated failed traders with something left to prove to themselves and the market, but without anyway to claim their revenge. It eases their egos to feel like they are still part of trading, still active and still valuable. Needy people at best, and as a newbie if they are in charge they expect you to listen, as does their boss who employs them. Most good traders are too busy ot too selfish to teach newbies, and because there are so many recruits who want or need advice the job is given to the wrong people, who have tons of free time on their hands (watching other do your old job better than you ever could is very boring I am told), so they need to keep themselves busy and look for excuse to create themselves work to justify their salaries. Risk managers love stopping people out as they feel like they are high and mighty and are making the BIG decisions, when they fail to realize that the big decisions are made by the traders and they are like the servants left to clean up after a party. The traders make the money, and without traders their is no risk job!! They are really just a paid snitch for the owner, like a school prefect with a tiny role that they feel the need to inflate in importance. I enjoy helping newbies to learn, especially I enjoy unraveling the bull-shit they learn from the trainers, and I would gladly coach 1-3 recruits per time for a cut of the recruits P&L, but the firms want to maximize profits and would rather pay a MUG a small salary to dish out bad advice so that they can keep the maximum amount of money that the newbies make if they become successful. Besides those risk types HATE me involving myself, as they see it as me treading on their toes. They feel that they are the ones who were chosen to be paid to do the teaching and I should butt out. The fact that I ACTUALLY have something to teach and they don't seems to escape their attention!!!!!! I do believe that their failed risk approach is handed down from upper-management and/or the owners. Those guys who were successful many moons ago on the floor say (most prop futures firms are owned by former floor traders) and who fail to realize that the markets are different and their ways are out-dated. Trading on the floor and the screen is very different, proven by the large number of floor traders who failed to make the transition. The owners don't get that THEY need to evolve just the way the traders have to. the problem is that they usually seem to have ideals as to how they want their firms to be run without realizing that THOSE ideals are usually the biggest limiting factors to the firms success. Just like a bad trader it is their unwillingness to change that causes problems. I think that the defensive approach newbies are encouraged to take with tight stops is largely designed to increase the trips that people do. Sometimes in certain markets it is better to have one trade and lose 4 ticks but allow the trade to breathe and potentially be a winner than to leap into trades 10 times and lose 10 individual ticks, plus all the brokerage that goes with it. Different market conditions require different trading strategies and time frames, and even different risk-tolerances per trade and most of these firms don't get it. They don't understand that ONE size does NOT fit all. And so the newbies die a death of a thousand cuts slowly and these firms continue to have massive turn-over and so many failures, the failures being paid for by good traders who cannot leave and the badly taught traders left to struggle to find another REAL job after being fired. Most firms are too greedy and want to be TOO big and quite frankly just don't care. They don't realize that with quality tuition far more people would get it and become successful with them, and as people had been well taught and good traders pay less to fund bad traders everyone could be happy. The good firms remain small and really nurture newbies into good traders, unfortunately they are few and far between and so most stick to the failing revolving door, commission based business model allowing traders like me to profit from the failures that they produce. There is not enough room for every firm to be successful, and bad firms pave the way for successful firms to feed off, or usually very good individual traders to feed off more like. But a tiny handful of good firms exist out there, unfortunately seeing as nobody is allowed to criticize and threads are deleted it is impossible for newbies to know in advance, and so they are left to walk blind into the mine-field. Talk to traders in the markets, as they will usually know the reputations of many firms, and if you don't know anyone then you better do your research and heed any warnings that you do come across, as otherwise you could be in-store for some nasty shocks down the road. Good luck and I hope that my long winded posts have provided some help to newbies as to what to beware of. I suppose that a few existing traders will laugh at the common prop firm observations too. Once again I state that all the above is my personal opinion and I am in no way implicating any particular firm, rather I am generalizing about the industry based on my own observations and the observations of many friends who combined have worked at several firms. I therefore believe that these generalizations have some substance and so should remain posted leaving the newbies to differentiate for themselves the wheat from the chaff. I feel I have to say that due to the absurd paranoia on these boards with legitimate threads being deleted. As I said good firms and bad firms do co-exist and so I am not advertising for anyone either as that seems to be forbidden also.
Also remember that the industy and profit margins are switching from a commisison based system to more of a fee based % payout based on assest under management. In other words, you have to work 2x as hard to make the same $$ you did a few years ago. The old "stock jockey" approach has been done for a few years now. The trend (at least at reputable IB's and firms) is crossing selling insurance, 401K rollovers, estate planning, and getting the clinet to pay a certain % 1.5? about,,, so in othe rwords, you have to bring in 2x as many assets to get paid as much as you didi in the sommisison world. It is much harder to make a great living as a FA, since the old model is obsolete... Clients wonst stand for the old way anymore since such cheaper or passive $$ management is available. I am not saying dont do it, but you either better have rich family and friends to get you off the ground and buy you some time to learn the business and fill your quotes (look to get about $10,000,000 under mgt in 3 years or you might get axed from what my friend says...) Either that, or you better be an excellent salesman and be able to take a lot of rejection without getting discouraged. And by the way, everyone starts off believing they can succeed, but so many burn out... it simply kills you over time if you arent getting any positive feedback. my .02
You are putting him off of the FA job but I can assure you that the same identical argument applies to trading!!!!!!!! In today's markets you have to actually work 10 times harder for about half the money, so to me the FA job sounds a fair bit less labor intensive, LOL!! The proof being that a few very good prop futures traders that I know and I mean guys capable of making $500k-1million+ for their account in a year are now walking away from the industry altogether. They figure that they would rather invest that money they made before in something new and less stressful than get caught in the rut of complaining how good it all used to be and struggling to break even. I think a very common misconception on these boards is to get your training/experience and once you have learned then you will have a skill for life and it is anything but that believe me. Newbies do have a HUGE edge in that when they start trading they have no expectation so today's shit market to an experienced trader is quite simply THE market to a newbie. They have never seen the easy days of the past where you could go with the flow on momentum days and walk away with $20k provided that you had the balls to hold the positions. Now it is a long hard struggle, the breakouts are less obvious and far less predictable and so when opportunity arises good traders are more skeptical as they have to be, bad traders keep looking for patterns of the way the markets were to re-emerge and so whenever they can will try and trade their old ways and usually lose. Sometimes experience of 2 years can be better than experience of 10 years for this reason. People would say yes but those guys haven't evolved and I disagree, it is just that they are too aware of all the possible market conditions and so unlike a newbie cannot fully concentrate on the actual current conditions. A person who has traded for 2 years is experienced enough usually to make money and will be primed to trade the current market, a guy who has traded for 10 years has to struggle to summon all his knowledge and channel it in the right place. Its very much like asking a person who left school 10 years ago to answer a simple science question say, it may be easy but with all the things you have seen and learned since it may be difficult to recollect. All I am saying is that the more you learn about the markets, the more reasons you can use to cloud your trading vision and that IMO is where a lot of good experienced guys seem to be going wrong, they just became too comfortable with the way the markets were then and are struggling to evolve in their expectation and maintain good focus. Plus a lot of guys after a bad run seem to forget what they used to do well, discipline starts to slip then etc. Just be warned that if you sign a prop deal now you may peak after a year or two and it may be all down-hill from there with you struggling to understand how you ever made money in the past. Only the REAL cream of the crop manage to do all the right things at the right time. I would describe it like this; after say 3-4 years you will have learnt all you can about price-action, TA, market-reactions to news/figures and so on and so will know it all, but most fail to execute and use that knowledge to the best of their ability and so for most who do get past the initial 2-3 years they struggle to turn it into a 10-30 years career. And if I am wrong then why are so many London prop futures firms full of highly knowledgeable ex-FX traders all who know TA, market fundamentals etc superbly and yet struggle to make money, when you get the occasional know nothing newbie start making £10k a day scalping 200 lots in the Bobl (short-lived usually however). A newbie starting from scratch can just concentrate on what they are seeing and don't keep anticipating the return to the good old days or the moves of the past and so just trade. In short it means that the newbies of today will also typically fall into a comfort zone after a while and when the markets change in nature they too will find themselves amazed, and keep expecting old patterns to work. Markets love to fool people, and some movement patterns of the past have the same initial look as trades of today, only with far varying results and often different eventual directions, LOL!! Trading is NOT guaranteed so don't think a training program is going to make you. That is the reason why I am so against guys taking salaried trainee positions. If you are going to be truly great it will emerge very quickly (belive me), and it may be a short-run in which case you are better getting the most out of it while it lasts for you, after 2-3 years you may start to struggle and so by the time a contract ends it will be too late to make any real money for yourself despite all your experience. I know so many traders who struggled early and were incubated by a salaried position and so carried going through the motions yet never progressing, and yet when they are fired/leave to get a split elsewhere they keep struggling, because they still think that they can pull it out the bag, that one day it will just click; well I have never seen that ever happen, ever!! If the penny doesn't drop quickly then it won't ever, you don't struggle for 3 years and then become a star one day when it all pops into place. Better to find out quickly than to waste 2-3 years and then be unable to get onto a grad program elsewhere as you will then be labelled a burn-out!! As for the 2nd part of your quote, well doesn't everyone think that they will succeed in trading when they start, that is true to in all business ventures, no one expects failure no matter what the odds. Traders too have fears, pressures and dejection (far worse than rejection) to cope with. A sales-job is hard, but i would rather client tell me to blow myself and hang up than be stuck in a bad trading position where money is being lost and the hope of the next opportunity is not even there. As always good luck, and try to weigh up all the pros and cons. I am not saying don't trade, just appreciate the game and how it works out for the vast majority; most huge successes don't last long. Some of the best traders I have ever seen had very short trading life spans of 2-3 years, like shooting stars they shined the brightest and yet burnt out the quickest, whereas the steady solidly consistent guys lasted longer. It really is the tortoise and the hare often in trading.
Mr Kamikaze: Thats the best post on ET in quite some time. Ur a man of many insights. Regards Senor Zen